Manufacturers in Yorkshire & Humber are looking at a tough twelve months ahead with the sector likely to contract in the face of a deteriorating economic outlook at home and abroad according to a survey published today by Make UK and business advisory firm BDO.
The forecast was made in the Make UK/BDO Q4 Manufacturing Outlook survey which shows manufacturing contracting by -3.2% in 2023. This comes on the back of a forecast -4.4% contraction this year, although Make UK stressed the number for this year is relative to a very strong 2021 which reflected the pandemic bounceback.
However, given Make UK has consistently been revising down its forecasts for manufacturing growth in 2022 throughout this year from 3% in March to 1.7% in July, 0.6% in September and now, a contraction of -4.4% (1), it highlights the extent to which conditions for the sector have weakened significantly, especially in the final quarter of the year.
In the last quarter, output in Yorkshire & Humber declined in line with the national picture at a balance of -5%, although orders held up and remained in positive territory again in contrast with the national picture. Given this feeds into future output Yorkshire & Humber may escape the worst of the declines likely in other UK Regions. Despite this weaker picture recruitment intentions remain strong in the Region given labour shortages and the scramble to attract and retain talent.
As well as downgrading its forecasts for manufacturing Make UK is forecasting GDP growth of +4.4% this year but, a contraction next year of -0.9%.
In response, Make UK warned of the danger of policymakers sleepwalking into an acceptance of little or no growth as a normal economic scenario. It re-iterated its call for Government to develop a wide-ranging industrial strategy with a long-term vision at national and regional level.
Furthermore, while the Chancellor took some welcome measures in the Autumn Statement to help ease the short-term pressures on business, Make UK said more measures will be needed if economic prospects continue to weaken. These should include:
- Alleviating labour shortages with temporary easements to the migration system and ensure manufacturers have the funds to train and retrain employees by expanding the tax exemption for work related training into a wider Training Investment Allowance
- Tackling the increased cost to business by extending business rates reliefs for retail, hospitality and leisure to manufacturing
- Spurring on much needed immediate investment by allowing first year allowances
- Re-thinking recent decisions on the R&D tax relief for small businesses to ensure manufacturers are not deterred from investing in critical innovations
Dawn Huntrod, region director for Make UK in Yorkshire & Humber, said: “There is simply no sugar-coating the outlook for next year and possibly beyond. Even for a sector as resilient as manufacturing these are remarkably challenging times which are testing even the best and most successful of companies to the limit.
“As a result, while the Chancellor has already brought in some welcome measures to help ease the cost pressure on companies in the short term, it may not be too long before we see him having to bring more firepower to ease cost pressures.
“However, the bigger issue is that the UK risks sleepwalking into an acceptance that little or no growth is the norm. Government needs to work with industry as a matter of urgency to deliver a long-term industrial strategy that has growth at national and regional levels at its heart.”
Steve Talbot, head of Manufacturing at BDO in Yorkshire and Humber, said: “Input prices for UK manufacturers are rising rapidly. Without the right long term government assistance we will see businesses holding onto their money to keep their operations running, rather than looking to invest in future focused initiatives for the longer term.
“This could result in manufacturing businesses missing opportunities to invest in automation and green initiatives, which will have an impact on the future competitiveness of the sector as a whole. The new government still needs to provide clarity on the support they will give manufacturers so they can plan their future with confidence.”
