The survey of 320 companies shows that UK manufacturers are seeing a boost in growth prospects as output and orders pick up, with the sector forecast to outpace the economy overall this year. It also shows that business confidence has risen to equal its highest level in the last decade as companies emerge from a two-year slump following the post-Covid rebound.
Looking forward, the survey shows that manufacturers want the next government to make delivering an industrial strategy its top priority. Such a strategy must have a ‘skills revolution’ at its core, with Make UK warning that a shortage of skills is now a critical issue for many companies.
According to ONS Labour Market Data, there are currently 64,000 vacancies in manufacturing which is costing £6bn in lost output, a figure calculated by multiplying the number of vacancies by the average GVA of every manufacturing worker. Vocational skills in particular are a concern, caused largely by a reduction in Level 2 and 3 engineering apprenticeships.
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The survey also shows strong support for the next government to ease the friction felt by businesses on both sides of the channel since the Trade and Cooperation Agreement came into force three years ago by strengthening relations with the EU.
In a statement, James Brougham, senior economist at Make UK, said: “With prices cooling and potential cuts in interest rates to come, the next government must capitalise on this scenario by delivering a modern, long term industrial strategy which goes beyond the 2030s and has cross government support. This must be supported by a revolution in skills, a shortage of which is the biggest factor affecting not just companies’ growth prospects but, in many cases, their ability to maintain daily operations and fulfil contracts. This must now be a national endeavour and begin with a fundamental review of the Apprentice Levy and wider vocational training system.”
According to the survey, the balance on output increased from +5 per cent in Q1 to +9 per cent in Q2 but is forecast to jump to +30 per cent in the next quarter.
Total orders are following a similar pattern, increasing from +7 per cent in Q1 to +14 per cent in Q2, rising to +32 per cent in the next three months.
Export orders (+10 per cent) exceeded UK orders (+2 per cent) highlighting how the UK continues to depend on global value chains for its success, but the pattern since the pandemic when UK orders have consistently exceeded export orders is forecast to resume in the next quarter at +25 per cent and +24 per cent respectively.
Recruitment intentions saw an increase from +8 per cent to +26 per cent as companies take on staff to meet the expected increase in demand and better economic outlook. Business confidence has also risen to equal the highest level recorded since the survey started measuring the indicator in 2014.
The survey also asked companies to list their top three priorities for the next government. More than two-thirds of manufacturers (69.1 per cent) said delivering an industrial strategy was the top priority, 54.2 per cent said strengthening EU/UK relations, and 44 per cent said reducing the business tax burden. This was followed by investment in national infrastructure (31.5 per cent) and reforming the Apprentice Levy (24.1 per cent).
Make UK is forecasting that manufacturing will grow by 1.2 per cent in 2024 with GDP growing by 0.9 per cent.
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