For most of last year our blog posts all had a similar theme – the fact that British manufacturing output, despite the doom-mongers, continued to defy gravity. Happily the New Year has kicked off with more of the same – and we hope for you too! As manufacturers and sub-contract suppliers of metal products, it’s great to see the industry as a whole thriving.
In November of last year we saw the seventh consecutive month of growth in UK manufacturing output. Official figures show industrial output rose by 0.4% in November. This amounts to the fastest rate of expansion since early 2008 and the sector is enjoying its strongest run of growth since 1997.
It also represents the longest spell of rising output from Britain’s factories in 23 years. Leading think tank, The National Institute of Economic and Social Research, forecasts that this puts the economy as a whole on course to record its fastest rate of growth since late 2016. They are pencilling in expansion in gross domestic product of 0.6% in the final quarter of 2017, up from 0.4% in the previous three months and above the latest City estimates.
Renewable energy projects, fabrication of machinery and equipment, boats, aeroplanes and cars for export helped make output 3.9% higher in the three months to November than in 2016. The biggest contribution come from energy supply, which increased by 3.2% – mainly because the temperature was warmer than average in October, but colder than average in November.
This is in marked contrast to the construction sector, where output in the three months to November fell by 2%, compared with the previous three months. That was the industry’s biggest quarterly fall since August 2012, with the only bright spot for the sector being a 1.2% increase in new housing.
British manufacturing is riding high on two big trends – a weaker pound and healthy global economic growth. Sterling’s fall in value following the Brexit vote has made UK exports more competitive. And for the first time since the financial crisis the three main engines of global growth, the USA, China and Europe, are performing strongly at the same time.
For example, car production increased in October as rising exports more than made up for falling demand in the UK. Just over 157,000 cars rolled off production lines in October, 3.5% more than the same month last year, according to the Society of Motor Manufacturers and Traders (SMMT). Exports were up by 5%, with more than 1.1m cars built for overseas markets so far this year, compared with a 2.9% fall in domestic demand.
Lee Hopley, chief economist at manufacturers’ organisation EEF, said: “UK manufacturers were, in the main, in good shape as 2017 came to a close, with the majority of sub-sectors enjoying growth. Manufacturers’ expectations for the year ahead point to output and export growth being maintained through this year on the back of continuing support from a burgeoning global economy. This, together with an ongoing commitment from government to deliver on its industrial strategy, will be crucial in helping to propel the sector forward,” she said.
EEF’s seventh annual Executive Survey, in partnership with global insurer AIG, reports on UK manufacturers’ expectations for the year ahead – and the outlook is very positive. On every firm level indicator in the survey (productivity, profit margins, export sales, domestic sales, temporary employment and permanent employment) more manufacturers are expecting growth than decline, and in every case responses are more upbeat than they were going into 2017.
So, the industry has enjoyed a terrific 2017 and things are looking pretty good for the months ahead. We’re certainly upbeat about 2018 and expect to be busy producing for our high-quality light-weight metal products. These include a wide range of components, office furniture, bespoke metal shopfittings and game bird feeders. Please don’t hesitate to get in touch if you’d like to discuss your requirements – you are assured of expert advice and a keenly competitive quote as you benefit from our value engineering experience.
While the media have been busy painting a bleak picture of the UK’s economic prospects, given the uncertainty surrounding Brexit, the nation’s manufacturers have ploughed on regardless – and produced a performance that confounds the naysayers. At Dymond Engineering we’ve certainly been busy producing a variety of custom metal products including desks, shelves, game bird feeders, retail display equipment and metal component parts, but it’s obvious that others have also been hard at work. In this post we bring you up to speed with the buoyant state of Britain’s manufacturing sector.
Order books are a key indicator of the health of the UK manufacturing industry and in the three months to November the CBI reported that total orders were running at a level not seen since 1988. At the same time export order books were at the joint highest for more than 20 years.
Anna Leach, the CBI’s head of economic intelligence, commented that: “UK manufacturers are once more performing strongly as global growth and the lower level of sterling continue to support demand.”
Overall sentiment among manufacturers is, not surprisingly, running high. Predictions are that output will continue its upward trajectory and expand further in the three months to February, albeit at a more moderate pace.
The food & drink sector accounted for some of the most dramatic improvements in the order books, along with chemicals. Exports of electronics and transport goods also showed a rise. Around one in five companies included in the survey expect prices to increase over the coming three months, with only two per cent anticipating a decline. This was somewhat higher than the long-run average, but was in line with the level of expectation for price inflation from the previous quarter. Stock levels of finished goods fell below the average long-run rate, with only 12 per cent saying they had more than adequate stock.
Another survey, The Purchasing Managers’ Index compiled by IHS/Markit, showed UK manufacturing activity grew at its fastest pace in more than four years in November – it hit 58.2 in November, the best level in 51 months.
The compilers of this closely watched report said the results indicated UK manufacturing had “shifted up a gear” last month. 58.2 level suggests strong growth as any reading above 50 indicates expansion.
“The domestic market remained strong but new export orders primarily from the US and Europe were a big part of this overall picture of success,” said Duncan Brock, who contributed to the report.
EEF, the manufacturers’ organisation, in conjunction with business advisory firm BDO, recently published their manufacturing outlook survey for the final quarter of 2017. This is also very upbeat, showing positive balances across all their main output and orders indicators across all four quarters in 2017.
According to the EEF/BDO Manufacturing Outlook Q4 survey, manufacturers are continuing to ignore the ongoing political uncertainty at home as improved global demand, from European markets in particular, and the increase in commodity prices is feeding growth across the manufacturing supply chain. This is compensating for weaker UK demand as the squeeze on living standards and Brexit uncertainty continues to take its toll domestically.
This strong performance, across all sectors and regions, has led EEF to upgrade growth forecasts for manufacturing for this year and next, meaning the sector will outperform the economy overall. Furthermore, the positive conditions in the fourth quarter mean that 2017 will be the first since the financial crisis when both output and order balances have been positive in every quarter throughout the year.
The bounce in business conditions seen over the course of this year is driving the need for investment in more capacity to fulfil increasing customer demands. This has led to the second successive improvement in investment intentions, with the balance of companies planning more capital expenditure hitting a three and a half year high.
Lee Hopley, EEF chief economist, said: “Stronger global growth has cemented the foundations for growth in manufacturing this year, but the sector’s contribution to the UK economy has been greater than most expected. Not only have we seen consistently positive survey responses in each quarter this year, but growth has been evident across all industry segments and UK regions in 2017.”
Tom Lawton, partner and head of BDO Manufacturing, added that: “Manufacturers have continued their strong performance into the final quarter of 2017, ending the year with plenty of festive cheer. The sector’s performance is being driven by increasing demand from around the world, in particular Europe. The task of government is very clear: it needs to deliver a Brexit that minimises disruption to manufacturers – they are the economic engine of the UK economy.
Here are nine headline facts in the EEF/BDO survey worth noting:
34% – the balance of manufacturers reporting increased output in the past three months
This level is unchanged from the previous quarter and better than survey respondents had anticipated three months ago. This marks a substantial turnaround from industry’s performance a year ago, when the average output balance across the year was -3%. Positive output responses were also broad-based across the sectors covered by our survey – a trend that has again been consistent throughout 2017.
21 percentage points – the gap between exports and UK orders balances
Global manufacturing activity as a whole has been on the rebound and this partly explains why an increasing number of manufacturers have recorded rising sales this year – particularly to overseas customers. 33% of manufacturers saw another quarter of increasing sales to export customers, unchanged from last quarter, but increasing the lead over UK sales.
3.6% – global growth forecast in 2017
With eurozone growth turning a corner this year, together with resilience in the US, an acceleration in growth in China and a return to growth in commodity exporting countries, organisations such as the IMF have been more optimistic about prospects. The EEF shares that optimism and expect global growth of 3.6% this year.
81% – proportion of companies identifying at least one export market supporting growth
The survey shows that over four-fifths of manufacturers have seen improving demand conditions in at least one major export market in the past three months.
Europe has consistently been the stand-out export market, with around 60% of survey respondents noting good demand from European customers in each quarter this year.
10 years – the last time output and all orders balances were positive
The survey has tracked the domestic and international ups and downs experienced my manufacturers since the financial crisis. The clean sweep of positive responses across all the output and order (total, UK and export) indicators this year is a rarity and one not seen since 2007.
Five consecutive quarters – the recent run of positive price balances
The Manufacturing Outlook survey has reported five consecutive quarters of positive balances on UK and export prices. The move into positive territory was initially a response to the rising input cost pressure which started to build after sterling collapsed last summer. However, a new round of pressures is emerging as oil and other commodity prices stage a recovery, and these are passed on to customers as manufacturers seek to protect margins.
20% – the balance of companies planning to increase investment
The market upturn in demand prospects is, inevitably, creating some capacity challenges. There has been some caution in investment plans, in part a consequence of uncertainty following the EU referendum. However, more manufacturers are now pushing ahead with additional capital expenditure to meet current customer requirements. The investment intentions balance hit 20% – the highest level in more than three years, with all sectors positive about their investment plans in the next 12 months.
11 quarters – the last time the business confidence indicator was higher
Given the positive outlook for sales, rising production levels and stronger global prospects, it is unsurprising that confidence levels have strengthened further. Looking to the next 12 months, confidence edged to a score of 6.7 out of 10; the highest level seen since the beginning of 2015 and a massive increase on the 5.3 score recorded immediately after the referendum.
2.1% – growth expectations for manufacturing this year
Following a very strong outturn for production growth in official statistics for 2017q3, the EEF predicts output will expand by 2.1% this year and 1.4% in 2018. This would make 2017 the strongest year of growth since 2014 and in both years that would see manufacturing growing faster than the whole economy – their forecasts for which are unchanged at 1.5% and 1.3% in 2017 and 2018 respectively.
So, British manufacturers have put in an excellent performance and the indications are that this successful run will continue for some time. We’re certainly optimistic about 2018 and anticipate continued strong demand for our high-quality light-weight metal products including components, office furniture, bespoke metal shopfittings and game bird feeders. If you have a requirement in any of these areas don’t hesitate to get in touch – we’d be delighted to share our value engineering experience with you and give you a highly competitive quote.
According to the very latest official figures UK industrial output grew at its fastest pace so far this year in September, continuing a trend that has been sustained for six consecutive months. As manufacturers of custom metal products including desks, shelves, game bird feeders, retail display equipment and metal component parts we’re delighted by this news. However, British manufacturing faces a few challenges and we welcome the fact that EEF, the manufacturers’ organisation, has been meeting with the Chancellor Philip Hammond MP and Shadow Chancellor John McDonnell MP to outline what help the sector needs. In this post we celebrate the success but consider some of the less positive aspects of our current economic situation that the government could help to address.
In September 2017 production rose by 0.7% compared with the month before according to figures just released by the Office for National Statistics (ONS), boosted by machinery and equipment output. Manufacturing output, a subset of industrial output, also rose by 0.7% in September. Separate data also showed the UK’s trade deficit in goods and services narrowed by more than expected in September.
This result is even more impressive when you consider that it is no flash in the pan. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, comments that “Industrial production has risen for six consecutive months, a feat last achieved 23 years ago”.
Whilst this steady growth and the recent acceleration are both cause for celebration there are signs that headwinds are gathering. The weak pound, which has helped spur the growth by making British goods more attractive to foreign buyers, is a mixed blessing. Sterling’s depreciation has benefitted manufacturers as their goods become more competitively priced for foreign buyers but the downside is that the cost of imported materials used in the production process has also risen.
The cost of imported materials hit a six-month high last month, according to a closely watched barometer of factory sentiment. The Markit/Cips UK manufacturing PMI index showed activity fell to 55.9 last month from 56.7 in August, as firms were hit by the rising cost of commodities. There was also a shortage of some materials such as plastics and steel.
This has led many commentators to describe the outlook for manufacturing as “mixed”. Howard Archer, chief economic adviser to the EY Item Club, quoted on the BBC News website, warns that “Increased prices for capital goods and big-ticket consumer durable goods, weakened consumer purchasing power, and economic and political uncertainty threaten to hamper manufacturers.” He adds, however, that “On the export side, a very competitive pound and healthy global demand are helping UK manufacturers competing in foreign markets. The weakened pound also appears to be encouraging some companies to switch to domestic sources for supplies.”
Given this slightly confused picture the EEF, the manufacturers organisation, is anxious to ensure the government does all it can to create favourable conditions for the country’s engineers and manufacturers in the months ahead.
Representatives of the EEF recently met with both the Chancellor Philip Hammond MP and Shadow Chancellor John McDonnell MP to outline what action they’d like to see. In both meetings the EEF emphasised the importance of using the budget to lay the groundwork for government’s industrial strategy agenda ahead of the white paper that is due shortly.
They also took the opportunity to remind both politicians that EEF’s recent investment monitor survey indicated that firms were holding back on investment due to the uncertain domestic environment, discussing at length with Mr Hammond ways that he could use the budget to turn this situation around. The EEF intends to keep up this pressure and will be publishing their budget submission very soon. You will be able to view this shortly on their media page .
So, well done to the nation’s engineers and manufacturers for increasing output for a sixth successive month, despite awkward economic conditions and uncertain times. And thank you to the EEF for lobbying the powers that be for a clearer sense of direction – something that has been sadly lacking over recent months. As for our colleagues in the industry – keep doing what you are doing! We’re busy applying our design-engineering, value-engineering and metal fabricating skills to a range of different projects, producing everything from metal components to office furniture and retail display systems to galvanised bird feeders. Get in touch if you have any jobs where our experience and capabilities can help you get excellent results at a keen price.
Earlier in the year we reported on the quarter 2 figures in the regular survey by manufacturing lobby group EEF in partnership with leading accountancy firm BDO. It was interesting to note that UK manufacturing did surprisingly well in April, May and June, despite three months of unhelpful political upheavals and economic uncertainty. As part of that industry sector, designing and making a wide variety of custom metal desks, shelves, birdfeeders, shopfittings and component parts, we’re delighted that that this strong performance has continued – despite an escalation of the turbulence and hot air coming from Westminster and Brussels.
Uncertainty is not good for business – it makes it hard to plan, invest and operate with confidence. In quarter 2 UK manufacturers had plenty to contend with, thanks to the early rounds of the Brexit negotiations and six weeks of electioneering following Theresa May’s ill-judged decision to go to the country in search of a stronger mandate and bigger majority.
In quarter 3 the uncertainty, if anything, ramped up. The election result has had many alarming consequences for the business community. We now have a clipped government with a very slender majority and a Prime Minister struggling to assert their authority. Many are now bracing themselves for the possibility of Jeremy Corbyn at number 10 Downing Street, with John McDonnell at number 11 – which will not be a welcome prospect for many British business owners and managers. What’s more, the slow progress of the negotiations between David Davis and his EU counterparts have increased the likelihood of a “no-deal” outcome on trade, another scenario that is very bad news for our economy, especially the manufacturing sector.
Despite all the external challenges facing British manufacturers over July, August and September we have proved remarkably unfazed by these distractions. This is testament to the resilience of the sector and the quality of the products. The EEF/BDO manufacturing survey shows that over half the companies surveyed over the quarter reported increased levels of output. Equally encouraging, this positive performance was evident across almost all the sub-sectors, including base metals, metal products, mechanical, electrical, electronics, rubber & plastics, transport and other miscellaneous sectors. The overall outturn this quarter exceeded most expectations at the start of the period.
What explains this excellent performance? The answer, it appears, lies overseas. Political upheavals at home have had much less bearing on matters than the economic activity in foreign markets. The number of businesses reporting an increase in export orders has mounted an impressive recovery over the first nine months of 2017, rising from -2% in the last quarter of the previous year to +33% in the last three months. Most sectors covered by the survey were pretty bullish about the export prospects, with basic metals, mechanical and electrical sub-sectors riding particularly high on this export wave.
In terms of financial performance the report highlights a number of positives. Some manufacturers are rebuilding margins if they are able to take advantage of the lower value of the pound to boost profits. On top of this, improved cashflow, solid demand prospects and another uptick in company-level confidence has contributed to a strengthening of investment intentions. Companies’ capital expenditure plans have been positive since the end of 2016 and investment plans have gained added momentum over the last quarter to achieve a level that is now at a ten quarter high.
In terms of our own business, Dymond Engineering anticipates continued strong demand for our design-engineering, value-engineering and metal fabricating services.
Will this strong performance by British manufacturers continue? There are so many imponderables that making any kind of prediction with confidence is almost impossible. On the downside there are understandable worries about the outlook for the UK economy in 2018 – firms may be upbeat about their own performance prospects the same cannot be said for the country as a whole. The EEF/BDO report notes that confidence in the UK economy has slipped for the second consecutive quarter. Weak official growth statistics, subdued forecasts from the Bank of England and the ongoing worries about the Brexit negotiations and the likelihood of getting a trade deal with the EU are all cause for caution.
Having said that, it’s all too easy to give more credence to the doomsayers. One positive, of particular relevance to UK manufacturers, is the steadily rising wages in emerging economies. A recent report by Steve Johnson in the Financial Times, and quoted in an article by Forbes Magazine, reveals that that China’s average wage level has tripled between 2005 and 2016.
This may gradually make it less attractive for companies to outsource their manufacturing to the likes of Asia and South America, something that can only be good for manufacturing companies in the UK. This trend also creates a hugely expanded middle class with the disposable income to buy consumer goods, thereby creating greater demand and boosting the world economy as a whole – a trend that is sure to create exciting opportunities for our domestic producers who are willing to export their goods to the BRICs and beyond.
Whatever happens, the British manufacturers who can avoid the wider political and economic distractions to concentrate on producing great products and do a great job of meeting customer needs, will continue to thrive. That’s certainly where our focus lies – so if you need high-quality light-weight metal products including components, office furniture and retail display systems just get in touch.
Please read Dymond Engineering’s terms and conditions for details of our modus operandi.
The team at Dymond Engineering are very pleased to announce the recent appointment of Marcus Kenny as our new Product Design Engineer.
Graduating in Mechanical Engineering from the University of Derby in 2013, Marcus has a wide range of experience in product design, metal production and project management.
Whilst at university Marcus won the University of Derby Technology Innovation of the Year Award for developing a training aid to develop firefighters’ understanding of casualty evacuation process from HGV’s
After graduating Marcus moved to North Devon to take up a graduate position with an international business. As Graduate Innovation Engineer his role was to manage the product development of new and innovative concepts, which involved product design, costing, production methods and project management, from concept to delivery.
Marcus then worked as Design Engineer and Project Manager with a local metal fabrication company. This involved liaising with clients, managing budgets and production costs, working with the production and site installation teams, ensuring projects came in on time and budget to the customers’ specifications.
As well as product design and development Marcus was involved in Project Management, pricing and quoting, client management, supply chain management and implementing lean manufacturing.
He then took 6 months out to establish his own Slacklining business and once that was running smoothly he worked as Operations Coordinator with a local company before joining us at Dymond Engineering & Metal Products.
Marcus is fitting into the team well and has impressed us with his skills in prototyping and project managing new product development. Marcus says he is enjoying the hands on nature of his role and particularly enjoys the diversity of working with 2D, 3D and hands on design work, as well as learning new skills. These include operating the CNC laser and learning to TIG and MIG weld amongst other things. He’s enjoying the fast paced production environment.
Outside work Marcus’ interests include climbing, Slacklining and travelling. He is always off on adventure when not working.
We are delighted to have him in the team. If you have any prototype work with us then Marcus will be your man. He looks forward to working with you.
Dymond engineering was delighted to sponsor the inaugural Scratch golf competition at High Bullen Golf Club this year.
Mike Garner is a member at the club and suggested the Scratch competition whilst he was a member of the club committee.
We are pleased to say the competition was a big success, they even enjoyed great golfing weather.
Alas Mike’s golfing prowess did not prevail on the day, but by contrast, Dymond’s design engineering skills will be utilised in the design and making of the unique trophies which will be presented at the annual Awards evening.
For further details about Dymond Engineerings modus operandi please read our terms and conditions.
Our new and improved galvanised bird feeders are proving very popular and selling well this season. Word is spreading amongst the Gamekeerper community and we are proud of the latest testimonial provided by Exmoor Headkeeper, Gareth Clark.
“We are already using most of the 40 feeders and I am delighted to say after over 2″ of rain all the feed remained bone dry.”
“This season we have started using the Dymond Engineering Partridge Feeders.
They are well built weighing some 25kg empty, thus not blowing around. They are 100% water tight, suitable for the Exmoor wind and rain.
Holding approximately 60kg of compound pelleted feed, they enable keepers to fill only in favourable weather, say on a twice a week basis. NO wet pellets clogging feeders at all.
Certainly we will look to increase our feeder number in years to come.” Gareth Clark, Headkeeper, Buttery Sporting.
Gareth’s comments certainly reflect the feedback we get from Headkeepers and shooting estates.