Today we publish our fifth annual Executive Survey in partnership with Aldermore, looking at manufacturers’ outlook for 2016.
As Maddie blogged on Friday, this time last year, manufacturers’ had a modestly positive outlook for 2015 with a fine balance between risks and opportunities. But that balancing act came down on the side of risks, and the year did not end as manufacturers expected.
Looking ahead to 2016, this is a year where risks loom large for manufacturers.
"2016 is a year where risks loom large for manufacturers"
- In 2016, manufacturers say risks outweigh opportunities
- Firms expect weaknesses seen in 2015 to persist this year
- Manufacturers expect to see firm level growth, but at a modest pace
- Manufacturers are taking a wide range of actions to create opportunities for growth
A risky outlook
The strongest theme that emerges from this year’s survey is that risks have become more prominent for manufacturers. More than two-fifths of companies believe there are more risks than opportunities for their business in the next 12 months. Whilst opportunities abound, potential challenges, and uncertainty about whether these will materialise, are leading to a more muted picture.
“More than two-fifths of companies believe there are more risks than opportunities for their business in the next 12 months.”
Key risks that manufacturers cite include:
- Significant movements in exchange rates.
- Economic volatility in a major market
- Uncertainty around the UK’s place in the EU.
Weakness set to persist
The weakness in the global economy that manufacturers experienced in 2015 is expected to persist in 2016. On balance, manufacturers’ outlook for global economic conditions in 2016 is, like at the start of 2015, on the modestly negative side.
Manufacturers expect to see firm level growth
Against this challenging backdrop, manufacturers still expect to see growth. However the weaker global economic outlook has led to a reduction in expectations for growth in 2016 compared with 2015. Fewer manufacturers now expect the domestic market to support sales growth and companies’ outlook for workforce expansion has moderated significantly. Against that backdrop, and whilst still seen as an attractive location to do business, companies say that the UK is not looking quite as good a place to manufacture as it was last year.
Manufacturers take a range of actions to combat weak outlook
Amidst these concerns, our Executive Survey shows that manufacturers are taking a broad range of actions to create their own opportunities for growth. Companies in the sector have dealt with volatile economic conditions for several years now, and will take proactive action to grow their businesses in 2016, albeit coupled with some more tough decisions.
Top priorities that manufacturers cite include:
- Increased investment in technology and innovation.
- Increasing sales into new export markets.
- Working with customers and suppliers to ensure supply chain flexibility.
But not all of manufacturers’ activities in the year ahead will be focused on finding growth opportunities, with some difficult decisions on the table; some firms will be taking action on reducing costs and improving organisational efficiency.
As another risk-filled year starts for the UK manufacturing sector, companies are preparing themselves with a broad-based effort to capture opportunities and mitigate exposure to these risks. We will be blogging with more detail from our survey throughout this week.