Despite high costs and skills shortages manufacturing
activity increases
Key findings:
- Output volumes expand sharply following weak last quarter
- Export orders lead growth while domestic market recovers
- Investment and recruitment intentions jump sharply
- US recovers second place for growth prospects after sharp
fall in Q2
- Manufacturing growth forecasts remain weak for this year and
2026
Britain's manufacturers have seen a sharp rebound in activity in
the third quarter of the year, with signs that pent up investment
demand has been released, while recruitment intentions have also
risen sharply. However, new analysis by Make UK shows the
inability to fill the current 46,000 vacancies in manufacturing
is now costing the sector £4bn in lost output every year (1).
According to the Make UK/BDO Q3 Manufacturing
Outlook survey, all indicators in the
survey have improved following a series of weak quarters, with
export growth in particular leading to greater demand.
Furthermore, the United States has recovered its position as the
second most favoured market for growth prospects, having dropped
out of the top three global blocs in Q2 for the first time in the
history of the survey in response to tariff uncertainty earlier
in the year.
However, despite more positive news, the survey also shows that
almost three quarters of companies (70%) expect further increases
in costs in the forthcoming Budget at a time when cost pressures
are already severe, with more than two thirds of companies (68%)
saying their costs have increased more than expected in the last
six months. As a result, more than half of companies (58%) have
already raised prices this year, while a similar number (53%)
intend to do so in the next six months, highlighting that
inflationary pressures for manufacturers remain in the pipeline.
Despite the sharp rebound in activity this quarter Make UK also
cautioned against the survey kick starting a period of stronger
trading, as growth forecasts for the sector remain weak with
output still forecast to fall by -0.1% this year and -0.6% in
2026.
Commenting, Stephen Phipson, Chief Executive at Make UK, said:
“After a period of considerable uncertainty in global markets,
these figures are an encouraging sign that manufacturers'
confidence is improving and, more importantly, being translated
into growth and investment. However, one swallow doesn't make a
summer, and with UK and European markets in particular remaining
anaemic it wouldn't take much to knock prospects for further
growth.
“It's therefore essential that manufacturers' fears of further
costs as a result of the forthcoming Budget aren't realised.
Government has made great strides in backing manufacturing with
its industrial strategy and it must avoid imposing any further
cost burdens which will hamper its number one mission of boosting
economic growth.”
Richard Austin, Head of Manufacturing at BDO, said:
“'These latest findings offer a glimmer of hope for the
manufacturing sector. Despite what has been a relentless year by
all accounts, manufacturers have somehow boosted their output and
doubled down on their investments to match.
“But this reprieve could be short lived. The spectre of the
upcoming Budget looms and the sector will need robust signalling
from the government that their investments are worth the risk.
All eyes will be on the Autumn Budget and it's vital that the
government seizes this opportunity to prove their commitment to
the sector and to the promises made in the Industrial Strategy.”
According to the Manufacturing Outlook survey, the balance on
output increased to +25% from +9% in the last quarter, with total
orders following a similar pattern up to 16% from -2% in Q2.
Export orders have resumed the pattern of driving growth,
increasing to +23% from +7%, while UK orders recovered to +12%
from -1% last quarter.
Recruitment intentions improved significantly to +15% from +1%
(-3% in Q1) while investment intentions increased sharply to +25%
from +2%. This would indicate that pent up investment demand has
been released given the balance in Q1 was similarly weak to Q2 at
just +5%. The survey provides encouraging evidence of where
investment is being spent with almost three quarters of companies
(70%) saying they plan to invest in technology and automation.
Ends
Notes to Editors:
- ONS Employment and GVA data
- The survey of 274 companies was carried out between 23 July
and 21 August
