SPECIAL REPORT electronics resulting in rising costs for many UK manufacturers .
“ Our latest Manufacturing Outlook survey indicates that costs have continued to climb upwards , impacting manufacturers ’ ability to produce cost-effectively and protect suppliercustomer relationships ,” it warned .
Certainly , for the first half of this year , UK manufacturers were passing on costs only partially , as evidenced by negative balances scores for margins . However , this quarter it appears that margins are increasing again , indicating that UK manufacturers are passing on higher costs at greater rates down the supply chain .
The Job Retention Scheme ( JRS ) ends in October , and many analysts expect redundancies to increase , despite well-known labour shortages in certain UK industries .
“ Manufacturers continue to seek new hires with great expectations to expand the labour force by the end of this year , but the impact of the recent National Insurance increase could impact those plans negatively . Coupled with this , the balance of intentions to increase investment in capital is now at the highest level ever , raising hope for significant technological advancement in the industry . Many of these investment plans are influenced by lessons learned from the pandemic , with manufacturers focused on building resilience and becoming more environmentally sustainable . Make UK members are increasingly engaging in the idea of building a green economy , with a focus on green technologies , green skills and developing green practices ,” added the report .
With COP26 looming , many countries have already made commitments on climate-related achievements . Over half of UK manufacturers surveyed by Make UK now include an ESG ( Environmental , Social and Governance ) strategy within their business . Many UK manufacturers also increasingly view Equality , Diversity and Inclusion ( EDI ) as a key element in their growth plans .
Challenges in focus
The biggest issues dominating UK manufacturers ’ agenda in recent months are supply chain-related which , in turn , are leading to rising cost pressures and increased selling prices . For now , UK manufacturers expect the domestic market to continue growing until the end of the year , although they expect the pace of growth to slow .
The UK logistics industry is facing a shortage of 100,000 drivers for lorries and heavy goods vehicles ( HGVs ), creating problems for UK manufacturers even if they can satisfy their labour needs . Brexit has been an aggravating factor in this .
Orders from overseas customers have also been recovering quarter-on-quarter , suggesting that firms are getting back to business-as-usual
“ UK manufacturers are navigating the new relationship with their EU neighbours , particularly from the context of sending workers abroad which will undeniably impact the longevity of supplier-customer relationships across borders . In addition , many of the challenges currently affecting businesses are outside their control , with shipping prices spiralling , raw materials scarce and HGV drivers missing ,” commented Make UK in its Manufacturing Outlook Q3 .
The MTA ’ s MACH UK exhibition , which next takes place from 4-8 April 2022 in Birmingham , UK .
“ However , despite exports improving to near prepandemic levels , imports are not returning as quickly . Analysts have theorised that this reflects the increased level of reshoring in the UK , partially backed up by the outstanding levels of UK orders . However , the weak growth in imports may also reflect the difficulties in sourcing components from the EU or elsewhere . Manufacturers continue to report positive demand conditions in the EU , with that average positivity having grown since the last quarter . This is followed by North America as usual , and the Middle East as a new entry to third place ,” it continued .
Growth in employment over the last quarter in the UK manufacturing industry hasn ’ t risen at the rate expected , chiefly due to the challenges posed by labour shortages in the industry across the skill spectrum . While longstanding issues , such as the ageing workforce , contribute to these challenges , it is also aggravated by more recent additions such as the challenges of hiring from the continent brought about by Brexit , massively reduced manufacturing apprenticeships and training programme enrolment ( during the pandemic ) and rapidly rising wage costs as firms struggle to retain key staff .
All key intermediate UK subsectors also indicated widespread increases in average prices for export goods , with the highest balances reported by Metal Products and Electrical Equipment . These price increases reflect global shortages in critical components such as electronic chips and various precious metals from these subsectors , which in turn filter into the costs of businesses that rely on components from those subsectors . Manufacturers expect prices and margins will grow again in Q4 2021 .
“ Additionally , UK manufacturers should remain wary of various challenges , including a rise in infections across East Asian markets impacting supply chains , input inflation as well as climate change . Managing these challenges appropriately will be critical to businesses navigating the UK ’ s current economic environment ,” commented Make UK .
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