Manufacturing

The IHS Markit/CIPS UK Manufacturing PMI® is out today, the key findings from the report are: UK Manufacturing PMI at a three-month low of 54.0 in July Weaker increases in the output and new orders Intermediate good production falls for the first time in two years Have you seen a change in your up-coming production orders? The softer growth patch of the UK manufacturing sector continued at the start of the third quarter. July saw slower rates of expansion in both output and new orders, as weaker growth of new work from domestic sources offset a stronger increase in new export orders. Price pressures also remained elevated as a strong increase in average input costs led to the steepest rise in selling prices since February. The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) fell to a three-month low of 54.0 in July, down from 54.3 in June and well below the highs achieved around the turn of the year. That said, the PMI remains comfortably above its long-run average of 51.8. July saw the weakest rate of expansion in UK manufacturing output in 16 months, as production growth was stymied by a concurrent easing in the pace of increase in new orders. The domestic market was the main focus of the slowdown in new business growth, as new export work increased at the fastest pace for six months. Companies reported improved demand from mainland Europe, the USA, China and the Middle- East. Some firms noted that promotional activity and new product launches had supported sales efforts in overseas markets. The strongest growth of both production and new orders was seen at investment goods producers during July. The consumer goods industry also fared relatively well, as growth of output and new work remained solid (albeit weaker than in June). In contrast, intermediate goods production contracted for the first time in two years, as the rate of expansion in new business slowed sharply to near-stagnation. Employment rose for the twenty-fourth month in a row during July, with job creation sustained across the consumer, intermediate and investment goods industries. Manufacturers linked increased staffing levels to planned company expansions, higher output and efforts to reduce backlogs of work. Has this been the same for your business? With a lack of candidates generally, could dropping your workforce during troughs have an impact on your staffing needs during peak times? July saw the degree of positive sentiment dip to a 21-month low, amid reports of uncertainty regarding both Brexit and the exchange rate. That said, almost 48% of companies still expect output to be higher in one year’s time, compared to just 8% forecasting a contraction. Some linked their optimism to capital investment, planned company expansions, new product launches, and research and development activity. Input cost inflation remained elevated in July, as rising commodity prices and shortages of certain raw materials drove up costs. Part of the increase was passed on to clients, leading to the steepest rise in selling prices since February. Don't miss out on any of the latest industrial news, updates and jobs Subscribe here

A new report has revealed the scale and importance of the manufacturing sector to the UK's economic wellbeing. The Manufacturer highlights some of its most significant facts and statistics for you. From economic prosperity and high-value employment to research and design, it is an absolutely vital sector, and high time it was appreciated for its unrivalled contributions to UK plc. The following is adapted from the foreword to a report – The True Impact of UK Manufacturing – conducted on behalf of the MTA (Manufacturing Technologies Association) by research group Oxford Economics. The fundamental questions MTA chief executive, James Selka, wanted answered are these: if the old chestnut ‘we don’t make anything anymore!’ is true, then how does this sector account for almost half of our exports? How is it that 70% of the UK’s Business R&D is in manufacturing? Because manufacturing is less obviously present in our communities – fewer people work in the sector than in previous generations, and factories are seldom located in town centres any more – there is a tendency to believe it is a sector that has declined to the point of irrelevance. But nothing could be further from the truth: in fact, UK manufacturing extends to about a quarter of the economy. That means that the sector is essential to delivering an Industrial Strategy that can work for the benefit of the country’s prosperity. The oft-repeated ‘fact’ that manufacturing accounts for only a small proportion of UK GDP tells you more about how GDP is calculated than it does about the true impact of manufacturing within the UK economy. Our report is an attempt to tell that richer story. There are three aspects to assessing the impact of manufacturing: The direct impact: the output of businesses that are traditionally considered as manufacturers for the purposes of the GDP calculation The indirect impact: the economic effect supported in the supply chains of those businesses The induced impact: the effect of the spending by people employed directly and indirectly in manufacturing. This report estimates all three of these impacts. The first gives us the relatively familiar numbers; 9% of GDP and 2.6 million jobs (still bigger than the UK’s financial services). However, the second and third elements give us real food for thought. Including the indirect impact, manufacturing accounts for 15% of the UK economy and more than five million jobs. When we incorporate the induced impact, the figures rise still further to 23% and seven million jobs. Those last two sets of numbers give a truer picture of the importance of manufacturing to the UK economy than the first. The reasons are clear: over the past 40 years, manufacturing has increasingly outsourced activities, which used to be done in-house, in areas as diverse as logistics and catering. There are also companies, from design houses to accountancy practices, whose activity, or at least a large part of it, is predicated on serving manufacturing businesses. That output and those jobs are not normally considered as manufacturing, but they would not exist if there was no manufacturing. Any assessment of manufacturing’s importance to the UK economy must take those indirect impacts into account. Not to do so is to miss half the picture. The induced impacts are also vital to understanding the full picture of the sector. If manufacturing disappeared overnight, it would leave a huge hole in the economy as the wages of manufacturers disappeared. Over time, other industries might substitute for manufacturing, but simply buying everything from abroad would not replace the lost wealth that manufacturing creates. The country would be much poorer as a result. Today, there is an opportunity, through the Industrial Strategy, to help the UK economy grow and boost our exports by fostering manufacturing investment to take advantage of industrial digitalisation and new technologies such as big data, artificial intelligence and additive manufacturing. With the government focused on delivering that Strategy and making the changes wrought by Brexit work for, not against, the UK economy, it is vitally important to understand the economic impacts of our industries in the real world. By demonstrating the importance of manufacturing, this report does just that. Don't miss out on any of the latest industrial news, updates and jobs Subscribe here