Today we published our first report of 2019 and, as has been the case since 2012, it is our Annual Survey of Manufacturing Executives to “open the ball”. You can download the full release here.
The year just concluded was not as positive as 2017, when manufacturing expanded by 2.6%, however, the sector is set to end 2018 with annual growth at about 1% - a weak, but still positive outcome.
So what did manufacturers tell us about their thoughts for this coming year?
The B-word is the main concern but not the only one
Talking about the risks in the year ahead, it is not a surprise that Brexit and Brexit related risks are topping our chart.
72% of our respondents agree that “Brexit is the biggest source of uncertainty for my business in 2019” with only 14% disagreeing.
As the chart above shows, the top three risks - namely exchange rate risk, delays at customs, upward pressure costs - are all mainly related to Brexit.
This chart shows the answers given by our respondents when no answer limit was in place. However, when only one option was available, a whopping 32% indicated “delays at customs” as the main concern for 2019. This result is the highest single risk ever recorded in our Executive Survey.
Manufacturers are concerned about delays at customs since this may have a negative knock-on effect which may impact just-in-time production and as a consequence delivery time and cash flow.
However, Brexit is not the only concern. As an example, cybersecurity continues to be recognised as a major risk with more than 60% of the respondents concerned about it.
On a positive note, as the infographic shows, only a small minority of manufacturers are not doing anything to prevent cybersecurity risks.
Compared to last year survey, the overall average remained unchanged. However, that hides a growing polarisation in prospective between respondents. Those who were optimistic last year are more likely to be optimistic this year, and those who were negative are more likely to be negative this year. Indeed, the “significant improvement” and “significant deterioration” answers increased respectively by 4.8% and 2.9%. This run to the extremes appears to have similarities to the one happening in manufacturing official data with some sub-sectors doing spectacularly well (e.g. electronics) and some other reporting contractions (e.g. basic metals).
Positive about global conditions but not as much as a year ago
The recurring theme behind manufacturing expansion in 2017 was about supportive global conditions and appetite for investment.
This situation changed during 2018 and even if the balance about global conditions remains positive, it is not at the same level as it was a year ago.
However, manufacturers still feel the global economy is in a better shape than the UK economy. Indeed, their faith in UK economic condition improved a little, but it still remains in negative territory.
It is worth pointing out that also in this case we recognised a polarisation in answers with 10% of respondents indicating a significant improvement in UK economic conditions and 10% indicating they expect the exact opposite.
A risky environment but still a good place to be a manufacturer
51% of our respondents think that 2019 will bring more risks than opportunities. This score is a notch above that recorded in 2018 and the highest level ever for our Executive Survey.
To conclude on a positive note, despite the risks surrounding the UK and global economy, 56% of our respondents think that the UK will remain a competitive place to be a manufacturer with only 16% disagreeing.