“ Several significant shocks have hit the economy in recent years , sparking a shift in its macroeconomic model .”
According to Make UK , the UK manufacturers ’ organisation , the UK manufacturing sector is an essential contributor to the country ’ s economy , generating £ 206 billion gross value added in 2022 ( a fifth higher than a decade ago ). It accounts for around half of all UK exports and two-thirds of spending on research & development . Despite accounting for just 10 % of the overall economy in GVA terms and 8 % of total employment , it contributes 15 % of total UK business investment and underpins 23 % of overall economic activity when counting spillover effects into ancillary services .
“ The sector directly employs around 2.6 million highly skilled people across the UK , mostly in areas that are otherwise left behind and in need of levelling up , and manufacturers pay salaries typically 12 % above the regional average . In short , manufacturing matters massively to the prosperity and security of the UK ,” said Make UK .
On 5 February this year , the OECD published updated forecasts for the world economy . It forecast modest global growth for the UK in 2024 and 2025 , with UK GDP set to grow by 0.7 % in 2024 and by 1.2 % in 2025 ( unchanged from its previous forecast in November 2023 ). On 30 January 2024 , the IMF ( International Monetary Fund ) published updated forecasts for the world economy . It forecasted UK GDP to grow by 0.6 % in 2024 ( unchanged from its previous forecast made in October 2023 ) and by 1.6 % in 2025 .
The uncertainty caused by Britain ’ s exit from the EU depressed business investment by as much as 11 % by the time of departure in 2020
Manufacturing outlook
AN EYE ON INNOVATION
We highlight forecasts , drivers and challenges for the UK economy and manufacturers .
Make UK published its Manufacturing Outlook for Q1 2024 , in partnership with business advisory firm BDO , on 8 March 2024 .
“ Britain ’ s manufacturers are facing the prospect of two years of low growth , with latest forecasts suggesting the rate for the sector will remain flat this year at 0.1 %, before increasing by 0.8 % in 2025 ( just half the forecasted GDP rate for the economy overall ),” said the report .
However , confidence levels among companies in the sector remain robust , with investment and recruitment intentions increasing compared to those in Q4 2023 . According to the survey , the balance on output fell significantly at the end of last year but is expected to rebound in the next three months . Total orders remained at similar levels but , likewise , are also forecast to improve over the same period in the report .
Similarly , in the previous quarter , both UK and export orders were flat but are both predicted to improve , while the post-pandemic pattern of UK orders consistently exceeding export orders looks likely to continue after a brief reversal in Q4 2023 , according to the report .
Underlying sectoral and regional imbalances also look set to persist with electronics , aerospace and food and drink powering ahead , whilst the South East and Wales are performing substantially better than other regions and devolved nations .
“ While manufacturers ’ own confidence remains robust , the overall prospects for the sector are weak for the foreseeable future . While there are clearly external factors at play , the UK economy has a fundamental growth problem which a ‘ business as usual ’ policy process simply will not address ,” said Fhaheen Khan , Senior Economist , Make UK .
“ The next Government of whatever colour must address this fundamental problem as a matter of national urgency , beginning with a long-term industrial strategy which will really shift the dial on
38 | ismr . net | ISMR April 2024