Today we published our third annual Regional Outlook report in partnership with BDO. This pulls together our survey results on the health of manufacturing over the past year, comparing and contrasting performance across the eight regions of England, Scotland and Wales.
We have picked out our 5 key highlights from the report
1) Confidence recovering, but not quite there yet in some regions
The past year has seen the restoration of confidence across all UK regions after the wobble in the immediate aftermath of the Brexit vote. The pick-up in commodity prices, as well as healthy global demand conditions has helped to rejuvenate demand in the sector – illustrated through some healthy output and order balances.
That said, uncertainty continues to dominate the economic and political landscape and as a result, confidence in some regions continues to ebb below pre-Referendum highs.
2) Healthy balances across the board…bar investment
The past year has seen a broad-based, across the country improvement in most of our survey’s key indicators. This is illustrated in the regional summary table, which is dominated by positive readings in output, orders and employment. Improved demand conditions are behind the impressive output and order balances, with export orders also benefiting from the prolonged sterling depreciation. It appears that this improved demand picture is prompting manufacturers to take on more workers, a trend which encouragingly looks set to continue in the coming months.
3) Investment unsurprisingly subdued over last year
The average investment balances over the last year were by far the weakest of our key indicators, and reflects the caution manufacturers have regarding the resilience of the demand environment, as well as uncertainty about the UK’s future deal with the EU. With political and economic uncertainty abound, we could see this trend being sustained over the coming year.
4) Sectoral make-up again crucial to regions performance
This year’s report once again illustrated that the health and performance of regional economies depends not just on the size of the manufacturing sector, but also its sectoral make up. For instance, regions such as the South West, with a high concentration of manufacturers in the transport sectors – particularly aerospace – have continued to benefit from strong order pipelines and healthy export demand. Conversely regions with a high concentration of consumer facing sectors like Yorkshire and Humber, are starting to feel the negative effects of inflation and wage growth dynamics, albeit not enough to dampen optimism.
5) Manufacturing is important to all regions
The report shows just how important manufacturing is to all regional economies. Hundreds of thousands of people are employed in manufacturing in each region of the UK, and whether that is a large proportion of the workforce, as in the North West, or a small one, like in the South East & London, manufacturing remains a crucial aspect to every region’s performance. There is clearly some work to be done, notably in closing the gap in productivity performances between regions, in which the higher than average productive manufacturing sector can help, both at a regional and national level.
You can read the full report, with extensive regional breakdowns, here.