The UK manufacturing sector is an essential contributor to the country ’ s economy
Image : Shutterstock . com .
STAYING FOCUSED
We highlight forecasts , drivers and challenges for the UK ’ s economy and manufacturers , including the automotive sector , in 2023 .
“ Crippling energy costs ; labour / skills shortages ; inflationary pressures and a poor Brexit deal are some of the challenges faced by British manufacturers this year .”
With an annual output of £ 183 billion , the UK remains the ninth largest manufacturing nation in the world .
“ The UK manufacturing sector is an essential contributor to the country ’ s economy , generating £ 206 billion gross valued added in 2022 ( a fifth higher than a decade ago ). It accounts for around half
our exports , two thirds of spending on research and development and a significant level of business investment . The sector employs around 2.6 million highly skilled people across the UK , many of them in areas that need levelling up . In short , manufacturing matters to the prosperity and security of the UK ,” commented Make UK , the UK manufacturers ’ association .
According to an assessment released on 23 May 2023 by the International Monetary Fund ( IMF ), the UK economy is expected to avoid a recession and maintain positive growth in 2023 . However , economic activity has slowed significantly from last year and inflation remains stubbornly high . Staff forecasts growth to slow to 0.4 per cent in 2023 , held back by tighter monetary and fiscal policies needed to curb inflation , and lingering impacts of the terms-of-trade shock .
“ Growth is projected to rise gradually to one per cent in 2024 , as disinflation softens the hit to real incomes , and to average around two per cent in 2025 and 2026 , mainly on the back of a projected easing in monetary and financial conditions . Thereafter , growth is projected to settle at 1½ per cent ( staff ’ s estimate of trend growth ). Declining energy prices and widening economic slack are expected to substantially reduce inflation to around five per cent y / y by end-2023 and below the two-per-cent target by mid-2025 ,” commented the IMF , warning that monetary policy would need to remain tight to keep inflation expectations well-anchored and bring inflation back to target .
Inflationary pressures are still very evident for UK manufacturers , with increased costs still being passed on
The manufacturing outlook
The UK ’ s manufacturers saw a rebound in activity in the first quarter of the year as domestic and global markets have improved , easing fears of a significant recession this year . The latest Make UK / BDO Q1 Manufacturing Outlook survey showed a marked pick-up on the picture in the final quarter of 2022 .
28 | ismr . net | ISMR June 2023