Friday, January 21, 2022

East Midlands manufacturers see mixed end to the year

Manufacturers in the East Midlands have seen a mixed performance at the end of the year, according to the latest quarterly Manufacturing Outlook survey from Make UK and business advisory firm BDO.

According to the survey, while all indicators on output and orders remained positive for East Midlands manufacturers, growth has slowed compared to the previous quarter, which is very much in line with the national picture and other business surveys.

Output and domestic orders were at balances of +14%, which are both still at reasonable levels historically, although export orders and total orders at +7% were below historic averages.

While the region will have benefitted from the upturn in food and drink as hospitality opened up in the second half of the year, the continued downturn in the aerospace and automotive sectors is still dragging on growth in the East Midlands.

Despite this mixed picture, the outlook for jobs across the region has significantly improved. The employment balance was +29% which is well above the national average while investment intentions also increased, possibly in response to the Chancellor’s extension of the Annual Investment Allowance in the Autumn Budget.

As with the national picture, the big challenge for companies, in addition to attracting and retaining talent, remains the escalating inflationary pressures which are forcing companies to raise prices, in many cases significantly.

Make UK has forecast growth for manufacturing in 2021 of +6.9%, down slightly from +7.1%, and growth in 2022 of +3.3%.

Charlotte Horobin, region director for Make UK in the Midlands, said: “While manufacturers in the East Midlands will be able to enjoy some festive cheer this year, their spirits will be tempered by the eye watering impact of escalating cost pressures which are leading an increasing number to pass these on to the consumer.

“Given the global nature of some of these pressures there is little sign that they will abate anytime soon. However, they will hope as we enter a fresh year that these will gradually unwind, with the compensation being that demand prospects among their major markets continue to look strong.”

Jon Gilpin, head of manufacturing at BDO in the East Midlands, said: “Manufacturers faced a brutal 10% decline in output in 2020. This year, they have rebounded proudly with some record-breaking figures. While challenges clearly still lie ahead, they can enter 2022 on significantly firmer footing than last year.

“Despite the dip in orders and output balances this quarter, the results for East Midlands businesses are still very positive compared to historical figures. However, costs pressures – input prices, labour, logistics and inflation – are settling in for the long haul and will continue to impact manufacturers well into 2022.”

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