In this issue: Weekly Focus: Quarterly Manufacturing Outlook survey shows manufacturing slowdown | Boosting productivity on the agenda with Financial Secretary to the Treasury | In the media | Week in review | The week ahead | Blogs from this week
Weekly Focus: Quarterly Manufacturing Outlook survey shows manufacturing slowdown
The latest quarterly EEF/DLA Piper Manufacturing Outlook survey shows that manufacturing is growing at a slower rate than expected. The balance of manufacturers reporting an increase in output over the past three months has dropped to 5%; the lowest response balance since 2013q1. Although last quarter’s expectations had anticipated a slowing in activity in the second quarter, the outturn is weaker than expected. As a result, EEF is revising its 2015 manufacturing forecast to 1.5%, down from 1.7%.
While export levels have remained fairly static over the past few years, the UK demand environment has become less supportive and a net balance of companies reported a fall in UK orders in the most recent quarter. The trend in orders reveals differing demand patterns across different sub-sectors, with a notable weakness in UK orders across the metals and mechanical equipment sector, industries that have a higher degree of exposure to North Sea oil and gas activity. The supply chain effects of the lower oil price look set to persist over the coming quarters as investment plans are scaled back or remain on hold. Consumer-facing sectors, such as motor vehicles and food and drink, were more positive about their new order intake over the quarter.
Despite manufacturers’ predictions three months ago of a turnaround in export demand, the latest survey reveals little improvement. However, more companies are starting to report an improvement in demand in European markets – particularly marked in electronics and motor vehicles. This trend could contribute to a stronger export performance moving into the second half of this year.
A mix of softer domestic outlook and an uncertain path for export demand has pushed down overall confidence about business activity and the UK economy over the next 12 months. With the loss of momentum in recent quarters and more subdued confidence, plans to increase investment levels and employees has fallen back. Forward-looking employment balances have also hit a two and a half-year low. While there has been a clear slowdown in these areas, there has been a sustained period of strong growth as companies caught up with the replacement cycle and expanded their workforce to meet demand.
For more information about the survey, contact Lee Hopley, Chief Economist
Boosting productivity on the agenda with Financial Secretary to the Treasury
This week EEF’s Economic Policy Committee hosted a roundtable dinner with the Financial Secretary to the Treasury, David Gauke MP, ahead of the Chancellor’s Budget statement on 8th July. Manufacturers highlighted the boost to UK productivity that can be achieved if manufacturing, a highly productive sector, is supported to grow. In particular, members raised the importance of:
- Securing an internationally competitive capital allowances regime
- Updating the business rates system to better support investment in plant and machinery
- The importance of staying in the European Union
- The need to sustain support in R&D and innovation, in particular through Innovate UK
- The reforms that could be made to UK Export Finance
The Minister also discussed the wider support the government will be giving through the tax system to help support investment. Following the General election, EEF will be continuing our engagement with new and returning Ministers, Shadow Ministers and senior officials to brief them on the role of manufacturing in securing a more productive economy and better-balanced economic growth.
For more information contact Lee Hopley, Chief Economist
In the media
The results of the latest EEF/DLA Piper Manufacturing Outlook report were widely reported in The Times (£), The Financial Times (subscription required), The Daily Telegraph, The Guardian, The Independent, The Daily Mail, The Daily Mirror (link unavailable) and BBC News. Chief Executive Terry Scuoler was also interviewed on BBC Breakfast, BBC News and Sky News.
EEF’s call to government to hold the EU referendum as soon as feasibly possible to end uncertainty for business and industry featured in The Times (link unavailable).
For more information contact Sophie Carroll, External Affairs Executive
Week in review
The manufacturing PMI edged up slightly in May to 52.0, from 51.8 in April. This marked the twenty-sixth successive month of expansion. (Anything above 50 signals expansion). Within this, the rate of growth in new orders picked up slightly from April’s seven-month low, with the domestic market remaining the key source of growth.
The week ahead
9th June: UK Trade
10th June: Index of Production
Blogs from this week
1 June 2015 - Manufacturing Outlook - momentum down, but not out by Lee Hopley
3 June 2015 - Penalties for employers who recruit overseas is not the answer to funding apprenticeships by Verity O’Keefe