Welcome to the final edition of Manufacturing Outlook for 2018, in partnership with EEF.
While our manufacturing outlook survey has continued to report positive output and orders balances throughout this year, there has been a clear moderation in the strength of those response balances – a trend that seems to have accelerated in the final quarter.
After the uplift noticed in the third quarter, our Q4 survey points to deteriorating trading conditions for manufacturers. Balances across our headline output and order indicators remain in positive territory but they continue to trend down at a level not seen since the end of 2016.
One standout development this quarter is the increasing demand in domestic orders, in comparison to exports. This follows increased anecdotal evidence of companies putting in plans to increase inventory levels ahead of the UK’s exit date from the EU. On the other hand, exports, which have boosted the manufacturing sector for almost the last two years, have hit the brakes.
- Output and orders remain positive but trending down
- Orders decrease at sharp rate with the export balance halving since Q3
- Domestic orders suggest companies are increasing inventory levels
- Investment and employment intentions down, investment at a sharper rate
- Europe remains overseas market with best prospects.
Download the full Q4 report for more information and analysis of the UK manufacturing trends.
Download the manufacturing outlook Q4 Report
Tom Lawton, Partner and Head of BDO Manufacturing, comments:
“Manufacturers have remained reasonably confident over the course of the year but the sharp decline in export orders is a real cause for concern.”
“Overseas demand has helped sustain manufacturing growth over the last few years and the EU remains the most important trading block for UK manufacturers. It is crucial that Britain is seen to be open for business with the EU and other key global markets. The result of the ‘meaningful vote’ next week will dictate the government’s next steps and hopefully provide some much needed certainty as we enter the new year.”
If you would like to discuss any of the topics raised in this report, please do not hesitate to contact Tom Lawton or your usual BDO Manufacturing partner.
Why manufacturing matters?
The manufacturing sector is hugely important for the UK economy, trade and investment. UK manufacturing employment stands at over 2.7 million people and manufacturing accounts for nearly half of all UK exports. Manufacturing also contributes 10% of all Gross Value Added. It is not hard to see why manufacturing is key to the UK’s trade balance and to see that this will become all the more true post-Brexit.
The Manufacturing Outlook Report is an EEF/BDO collaboration. It is important to us that we understand the challenges that you face in running your manufacturing businesses. It helps us use our skills, experience and knowledge to make a tangible difference to your business.