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.