UK Manufacturers Optimistic Despite Challenges, Survey Reveals

British manufacturers are experiencing a period of challenges but remain optimistic about the future, according to a recent survey conducted by industry body Make UK and accountants BDO. The study reveals a complex landscape for the UK's manufacturing sector, which has been a cornerstone of the nation's economy since the Industrial Revolution in the late 18th century.

The survey indicates that factory output fell to a four-year low of -2% in the third quarter of 2024, down from +9% in the previous quarter. However, respondents forecast a significant surge to +33% in the fourth quarter of 2024, reflecting a renewed sense of optimism in the industry.

This positive outlook is largely attributed to the recent political shift following the Labour Party's landslide victory in the July 4, 2024 election. The Labour Party, founded in 1900, has returned to power after a 14-year hiatus, marking a significant change in the UK's political landscape. A majority of 58% of surveyed companies believe this change will improve British economic growth prospects, with only 6% anticipating a negative impact.

Richard Austin, head of manufacturing at BDO, commented on the findings:

"Manufacturers are hopeful that a period of greater political stability will provide a better economic outlook ahead, and that in turn is boosting business confidence."

The survey results have prompted Make UK to upgrade its forecast for British economic growth in 2025 to 1.8% from 0.8%. This optimism comes despite recent challenges, including the COVID-19 pandemic, which caused a 9.7% contraction in the UK economy in 2020.

However, the manufacturing sector's contribution to the UK economy has been declining. A recent analysis showed that manufacturing accounted for only 9.2% of British economic output during the second quarter of 2024, a record-low share. This is a stark contrast to its peak of 25% of GDP in 1970.

To address these challenges and capitalize on the renewed optimism, Make UK has outlined several recommendations for the new government:

• Implement a long-term industrial strategy, building on the Modern Industrial Strategy introduced in 2017.
• Bring forward the introduction of Britain's Carbon Border Adjustment Mechanism to 2026 from 2027, aligning with the EU to prevent trade flow distortions.
• Reform apprenticeship funding to address the significant drop in apprenticeship starts.

These recommendations aim to support the UK's position as the world's 9th largest manufacturing nation by output. The sector currently employs approximately 2.7 million people and includes world-leading industries such as automotive (the UK's largest manufacturing sector), aerospace (second largest globally), and pharmaceuticals.

As the new government prepares to present its first budget on October 30, 2024, the manufacturing industry eagerly awaits concrete actions to support their sector. Austin emphasized:

"All eyes are on the government's next steps. We need an industrial strategy that is fit for purpose to ensure that the confidence firms currently have in future economic prospects is not misplaced."

The coming months will be crucial in determining whether the UK can leverage its rich industrial heritage and current optimism to drive growth in its manufacturing sector, ultimately contributing to the nation's goal of reaching net-zero carbon emissions by 2050.