manufacturing survey 39 Export
The eurozone continues to be the single largest market for export activity followed by North America and then the rest of Europe. However, Africa is becoming a more popular market for export with 33% of participants exporting there, compared with just 23% last year.
Export destinations 2014
Europe excluding the Eurozone Eurozone
North America Asia excluding China
Africa China
South America Australia Middle East
8% 8%
Multiple responses included 21% 24% 33% 46% 83% 54% 57% Financial considerations
84% predict their cost of production will rise, with energy prices, price of materials and labour costs being the key issues. Respondents also indicated some concern around the cost of pensions, with auto-enrolment beginning to have an impact. As 58% felt they could not pass on price increases to customers in 2014, improved productivity proved the most popular method of absorbing rising prices, with increasing volume/sales being the second. It may be that in light of the optimistic predictions for growth, companies are prepared to invest in improving productivity by updating machinery or developing more efficient processes.
The economic outlook Professor Joe Nellis, Cranfield University
The UK economy is starting to pick up momentum with GDP forecast to grow at around 2.7% in 2014. However, recovery in recent quarters has been largely driven by a sharp upturn in the housing market. Inflation seems to be under control and interest rates are expected to stay on hold for the rest of 2014. The governor of the Bank of England has indicated that interest rates will only be increased on a gradual basis to support sustained economic recovery. The economy
continues to rebalance away from an over-reliance on debt-financed consumer and government spending towards a greater impetus from corporate investment spending and exports.
Manufacturing output is likely to expand in line with the economy at 2.7% growth this year, following the slight contraction in 2013. Significantly, the sector is reporting an upturn in optimism; a key indicator which will positively impact business investment and employment decisions. The emerging markets will become even more important drivers of UK manufacturing and engineering output in the coming years as millions of their citizens continue to enjoy an improvement in living standards, which many of our exporters aim to take advantage of.
Manufacturing and engineering: the future Jason Mitchell, head of manufacturing & engineering, MHA MacIntyre Hudson
The survey paints a picture of growing optimism, supported by continuing investment in R&D and capital expenditure, as well as an increase in recruitment. However, a shortage of recruits at every level is harming future prospects.
While memories of the longest and deepest recession are still fresh in the minds of many, there is cause for renewed optimism as many firms in the sector have restructured and improved productivity in recent years, and
are now reaping the benefits. For the time being most are looking to absorb any cost increases, however, this is unlikely to be sustainable long term. While apprentice recruitment is due to increase, 65% of companies are experiencing problems with the skills deficit and the availability of motivated recruits, skilled engineers and graduates.
The Government is committed to rebalancing the economy through manufacturing but the skills deficit will become a real barrier to growth and will undoubtedly affect the UK’s ability to compete on the global stage.
While the trading environment is showing positive improvement – with the increased R&D support, a £7 billion package to cut energy bills and the increases in the Annual Investment Allowance (announced in the Budget), there are still many challenges, particularly around energy prices, increasing regulation and the costs associated with auto-enrolment. We also need to motivate our young people to consider a career in engineering and manufacturing; otherwise the competitive ability of UK manufacturers looking to trade around the world will be seriously compromised.
MHA MacIntyre Hudson is a leading accountancy and business advisory firm and recently won National Firm of the Year at the British Accountancy awards in recognition of their proactive approach, sector expertise and commitment to client care. In conjunction with The Business Magazine, they will be hosting a roundtable to discuss the key issues affecting the sector this summer.
If you would like to discuss any aspect of the survey or would like a complimentary copy of the full report, email:
ReadingInfo@mhllp.co.uk or visit
www.macintyrehudson.co.uk
THE BUSINESS MAGAZINE – THAMES VALLEY – JULY/AUGUST 2014
www.businessmag.co.uk
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