Tuesday, October 19, 2021

East Midlands manufacturers see mixed picture through the summer

East Midlands manufacturers are seeing a mixed economic picture as they enter the Autumn, according to a major survey published by Make UK and business advisory firm BDO.

While the overall national picture is largely positive as the sector rebounds from the brutal 10% fall in output seen in 2020, companies in the East Midlands have seen growth prospects flatten off after a strong first half of 2021.

According to Make UK, this may be accounted for by supply chain disruption and current labour shortages.

In particular, while both UK and export orders were still positive for East Midlands companies in the last quarter, they have tailed off compared to the very strong picture seen in the first half of the year.

By contrast, output increased to a balance of +43% – very high by historical standards – reflecting the strong order books seen in the last quarter.

A similar, although marginally weaker, picture exists for both investment and recruitment intentions which, while still in positive territory, have declined slightly from the last quarter.

However, Make UK stressed that growth patterns for the medium to long term remain robust as economies open up. Assuming vaccine effectiveness is strong, forecasts suggest that manufacturing output levels will return to pre-pandemic levels by the end of 2022, earlier than previous forecasts had predicted.

As a result, Make UK has retained a strong growth forecast for 2021 for manufacturing of +7.1%, tailing off slightly for 2022 to +4.4%. Should these forecasts be met then manufacturing will have recovered all its lost output from 2020.

Charlotte Horobin, region director for Make UK in the Midlands, said: “While the picture for growth for East Midlands companies has flattened, prospects for the medium term continue to accelerate for manufacturers as economies at home and abroad continue to open up.

“However, supply chain shortages and the rapidly escalating increase in shipping costs are threatening to put roadblocks on the road to faster growth despite the current optimism.”

Jon Gilpin, head of manufacturing at BDO in the East Midlands, said: “While investment levels in the region aren’t the highest, they are still a significant improvement on the results recorded in 2020 and indicative of an industry that is becoming increasingly confident of a future worth investing in.

“Manufacturers have proved their resilience over and over again, but we know big challenges remain. Increasing costs, rising inflation and the ongoing battle to attract and retain skilled workers locally will continue to stress-test East Midlands makers for the remainder of the year.”

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