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Make UK/BDO survey - Industry slashes investment in fight for survival

21 September 2020

Sector climbs off the bottom but no evidence of V shape recover.

Key findings:

  • Output and orders improve but still way below historic averages
  • Significant cuts to investment while employment prospects weaken
  • Forward looking indicator suggest conditions will improve albeit slowly
  • Just under a fifth of companies operating at full capacity, rising to just over a quarter expected to be by the end of the year
  • Industry forecast to contract by more than 10% in 2020 with forecast recovery for 2021 downgraded

Britain’s manufacturers have slashed investment in a battle to stay afloat despite improvements in output and orders from the historic lows of the last quarter according to a major survey published today by Make UK and business advisory firm BDO. 

According to the Make UK/BDO Manufacturing Outlook Q3 survey the balance on investment intentions fell to -32% from -26% in the last quarter. Whilst not reaching the levels of cutbacks seen during the financial crisis as yet, the trend downwards is following a similar pattern to that seen at the end of 2008 and beginning of 2009. 

By way of an indicator as to how far investment has been cut back this year the balance in the first quarter was +20% as industry bathed in what seemed greater political certainty following the general election. The biggest cutbacks were in Yorkshire & Humber, Wales and Scotland.

Make UK also warned that given the uncertainty surrounding the Brexit negotiations and the very real possibility of ‘no deal’, the combination of that outcome with the continued impact of the pandemic could cause further damage to investment prospects in the latter part of the year.

Commenting, Stephen Phipson, Chief Executive at Make UK, said:

“Manufacturing has begun to climb away from the abyss that it stared into earlier in the year. But, make no mistake it is going to be a long haul back towards normal trading conditions, with talk of a V shaped recovery nothing more than fanciful.

“Having emerged from three years of political uncertainty at the end of last year, increasing talk of a final ‘no deal’ exit from the EU would be a final nail in the coffin for many companies. If we are to avoid this and, the avalanche of job losses that would follow in already hard hit areas and sectors, it is essential that the first step towards a fuller recovery is provided by a comprehensive trade agreement with the EU.”

Tom Lawton, Head of Manufacturing at BDO added:

‘While the manufacturing industry has managed to claw back some lost ground from a dismal Q2, the continued collapse in investment intentions is a real cause for concern. With a no deal Exit from the EU - and associated logistics, customs and cost implications - looking increasingly likely, British manufacturers will need to step up a gear in order to compete internationally, and this will require significant investment in productivity and digitalisation improvements. 

‘No-one is in any doubt about the financial challenges facing manufacturers, but turning the investment taps off now will have serious medium to long term implications. The Government must be alive to this risk and provide the support required to help UK manufacturers through this transition period and beyond. Other countries (perhaps in particular Germany) do provide good examples of consistent long term support to their manufacturing sectors. The UK should look to adopt a similar approach.’

According to the survey the balances on output improved to -36% from -56% in the last quarter which was the lowest balance ever recorded in the 30 year history of the survey. UK and export orders also improved from similarly historic lows to -36% and -34% respectively. 

More encouragingly, companies expect the prospects for industry to continue moving in an upward direction with the balance forecast for output for the next three months improving to -7%. Whilst still negative this would represent a significant improvement.

By sector there were marked differences with Basic Metals reporting a shockingly bad balance of -75% as demand for steel dried up from the automotive and aerospace sectors. By contrast other sectors such as electronics, machinery equipment and electrical equipment all improved in line with the UK averages with the forecasts for the next three months showing a continued improvement. 

Despite the improvement in business conditions since the start of the crisis, the employment balance weakened since the last quarter, falling to -29% from -22%. This would indicate that manufacturers are cutting back on staff, though whether it means companies are adapting to the new environment by improving productivity with fewer staff remains to be seen.

In line with other recent economic indicators of an improvement in business conditions almost a fifth of companies are now at full operating levels (17.6%) while a further 28% are operating between three quarters and full capacity. Looking forward over a quarter (27%) expect to be at full capacity at the start of 2021 while a further third (35.4%) expect to be between three quarters and full capacity.

Given the impact on the sector Make UK is now forecasting that manufacturing output will fall by almost 11% (10.9%) while it has downgraded its forecast for recovery in 2021 by more than a full percentage point from 6.2% to 5.1%. GDP is forecast to fall by -8.5% this year before recovering by +10.1% in 2021.


Notes to editors

About Make UK
Make UK, The Manufacturers’ Organisation, is the representative voice of UK manufacturing, with offices in London, Brussels, every English region and Wales. 

Collectively we represent 20,000 companies of all sizes, from start-ups to multinationals, across engineering, manufacturing, technology and the wider industrial sector. We directly represent over 5,000 businesses who are members of EEF. Everything we do – from providing essential business support and training to championing manufacturing industry in the UK and the EU – is designed to help British manufacturers compete, innovate and grow.

From HR and employment law, health and safety to environmental and productivity improvement, our advice, expertise and influence enables businesses to remain safe, compliant and future-focused. 

Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world. 

Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high growth businesses that fuel the economy.  

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed.  


BDO LLP operates in 17 offices across the UK, employing 5,500 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO International network.

BDO’s global network
The BDO global network provides business advisory services in 167 countries, with 88,000 people working out of 1,800 offices worldwide. It has revenues of $9.6bn.  


Mark Swift
07979 543710