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In this issue: Weekly Focus – Signs of stabilisation in 2016q1 Manufacturing Outlook survey | 2050 Industrial Decarbonisation Roadmaps | National Living Wage | Business Growth Fund – investing in manufacturing | In Parliament | In the media | Week in Review | The week ahead | Blogs from this week
Weekly Focus – Signs of stabilisation in 2016q1 Manufacturing Outlook survey
The start of 2016 saw the key output and total orders balances up from their six-year lows of late last year but remaining in negative territory for the third consecutive quarter. The improvement suggests that the pace of decline in manufacturing has started to ease.
Yet the balances are still weak because of the lingering challenges facing UK manufacturing. In particular, the steel industry is under exceptional pressure from global oversupply caused by Chinese dumping. Also, the low crude oil price is weighing on the demand of North Sea oil and gas companies for investment goods, hurting manufacturers embedded in the supply chain. Furthermore, slower economic growth in emerging markets such as China is dampening their demand for UK exports. The recent improvement in the output and orders balances doesn’t appear to be a one-off as far as manufacturers are concerned, as the balances of both in the next three months climb back into positive territory.
Despite signs that output and orders are bottoming out, manufacturers remain cautious about hiring and investing in capital because of heightened global and domestic uncertainty. The recent volatility of stock markets across the world highlights fears about the growth outlook in emerging economies and whether the US Fed’s move to start raising interest rates late last year will prove premature. The outlook for hiring is subdued, with the survey showing the employment balance in the next three months falling back into negative territory. Manufacturers are also pessimistic about the prospects for investment. The balance for planned capital expenditure in the next 12 months fell further into negative territory.
On balance, manufacturers fared a little better in early 2016 than previously, with signs that the sector has passed its trough and the improvement will continue in the next three months. Yet the heightened global and domestic risks mean that there’s still a lot of caution. This is reflected in our forecast for manufacturing this year – we expect modest growth of 0.6% in 2016, picking up to 1.5% next year. UK GDP is expected to increase by 1.9% this year and 2.2% next.
You can read our full report here, or following our manufacturing commentary on the blog.
2050 Industrial Decarbonisation Roadmaps
On Monday this week UK Steel representatives attended a ministerial event, with Anna Soubry and Lord Bourne, to develop decarbonisation action plans for eight energy intensive industrial sectors through to 2050. UK Steel took the opportunity to directly question the Business Minister on the continued delays to the state aid application for renewables compensation and the lack of publication of a crucial, government funded report, on international industrial energy price comparisons. More generally, industry continued to stress the need for Government to be realistic in what level of Government intervention may be required to deliver deep cuts to industrial emissions; with frequent comparisons made to the challenge represented by the power sector.
For more information contact Richard Warren, Senior Energy & Environment Policy Adviser
National Living Wage
With just one month to go until the new National Living Wage comes into force, the Government is urging businesses to prepare early for the changes and make sure they follow these four simple steps:
- Know the correct rate of pay - £7.20 per hour for staff aged 25 and over
- Find out which staff are eligible for the new rate
- Update the company payroll in time for 1 April 2016
- Communicate the changes to staff as soon as possible.
By taking these measures, companies will be able to properly reward their staff and avoid falling foul of the law when it takes effect.
You can find out more by visiting http://bit.ly/1RbKs8Z. Join the conversation on Twitter by following @bisgovuk and the hashtag #NationalLivingWage.
Business Growth Fund – investing in manufacturing
BGF (Business Growth Fund) has announced its latest investment in a manufacturing business after committing £10m of growth capital to Midlands-based manufacturer of stampings and welded assemblies, Sertec. This is the 36th British manufacturing company that BGF has backed since its launch in 2011. The firm has now invested in more than 100 businesses in total, making it the UK’s most active provider of growth capital.
BGF makes long-term minority equity investments in privately-owned or AIM-listed businesses that typically have revenues of between £5m and £200m. Its initial investments are usually between £2m-£10m and it can provide additional funding to support further growth. For further information please contact the BGF team directly via firstname.lastname@example.org.
In exchanges at Prime Minister’s Questions the Leader of the Labour Party Jeremy Corbyn mentioned the Prime Minister’s recent video address to the EEF National Manufacturing Conference where he said that the UK has a skills shortage.
In a debate in the House of Lords on the EU referendum, Lord Lee of Trafford mentioned the recent vote at the EEF National Manufacturing Conference where over 80% of attendees voted in favour of the UK remaining in the EU.
In the media
There was much coverage across major media outlets of EEF’s publication of its Manufacturing Outlook 2016q1, including Reuters, The Guardian, The Daily Express and The Evening Standard. EEF Chief Executive Terry Scuoler’s comments voicing concern about the impact of any transition out of the EU were featured in Financial Times (registration required). Comments made by EEF Director of Employment and Skills Tim Thomas, reacting to Sajid Javid’s announcement that the Government would make £10bn in savings by cutting red tape, were featured in the Daily Mail, The Times and City AM (links unavailable). EEF was mentioned in articles regarding the instability of the global financial markets including The International Business Times.
For more information contact Alex Block, External Affairs Executive
Week in review
Index of production
Manufacturing output rose by 0.7% in January, reversing the decline seen in the previous three months. The gains were fairly broad based across sub-sectors, with the biggest pick-up seen in rubber & plastics and basic metals.
The week ahead
11th March: Trade
16th March: Labour market statistics
Blogs from this week
07 Mar 2016
A look ahead at the week's data releases by by Lee Hopley
07 Mar 2016
There are signs that manufacturing is starting to stabilise by Zach Witton
08 Mar 2016
Better supply of finance to SMEs fails to spur demand by Verity O’Keefe