Against the odds: The future of UK manufacturing
Against the odds: The future of UK manufacturing
Energy challenges
A regional outlook
North West
Scotland
Despite the wider manufacturing sector’s natural resilience, challenges abound. Inflationary factors have been – and will continue to be – the biggest issues when it comes to business risk, and energy is front of mind as firms look ahead.
Richard Goodall, Director at FRP said: “It’s been a difficult year for the manufacturing sector, with the latest PMI data showing that industry output has now been in decline for 12 consecutive months. With this in mind, it’s understandable that many business owners are looking to cut investment and preserve resources.”
Callum Carmichael, Partner at FRP said: “It’s encouraging to see that confidence is returning to Scottish manufacturers after a difficult year. Not only does this demonstrate the strength of the industry locally but it’s also a prime example of how the development of resilient, reliable supply chains can help protect against global shocks.”
What were the biggest risks to manufacturers over the past 12 months?
North East
Midlands
Martyn Pullin, Partner at FRP said: “The manufacturing industry plays a pivotal role in the local economy, helping to sustain jobs and communities across the region. It’s been a tough few years across the board, with supply chains hit by the double shock of the Covid-19 pandemic and soaring energy prices, so it’s encouraging to see such a sense of optimism prevailing throughout the sector. Technological developments such as automation and AI
Raj Mittal, Partner at FRP said: “The past year has been a difficult one for the region’s manufacturing sector, so it’s encouraging to see such a high proportion of respondents confident in their ability to successfully trade through the next 12 months. There is still uncertainty though, particularly within the automotive sector, which had made great strides towards meeting the initial 2030 ban on petrol and diesel combustion engines ahead of the Government’s decision to extend the deadline.”
Energy costs
Higher material costs Growing wage bills Increased import costs
What are the biggest risks to manufacturers in the next 12 months?
Increasing energy costs
Costs in materials Availability of materials Access to labour
will undoubtedly reshape the face of the industry.”
issue for the industry, which is in need of creative solutions to attract new talent to take the place of ageing workers who are leaving the sector. This is ultimately a more ‘sticky’ form of inflation; hard to reverse, in contrast to energy and materials costs, which can fall with the market. While pay in the manufacturing sector is generally competitive, one area where firms can struggle to compete with companies in other sectors is flexibility. However, there are things that manufacturers can do, like offering shift swapping, to make themselves more attractive as employers.
Concerns surrounding imports and shipping are perhaps surprising as container shipping costs have now fallen back to pre-pandemic levels, so it is likely that respondents are referring to post-Brexit regulation costs. While energy costs have declined slightly, so has the support available from government, which has faced criticism after calling time on the Energy Bill Relief Scheme in favour of the new Energy Bills Discount Scheme, where firms get a discount on wholesale prices, rather than having their costs capped.
South West
London
Jonathan Dunn, Partner at FRP said: “As many of the supply issues firms reported last year have now been resolved to a large extent, with the most pressing concerns now on the demand side of the scale – we would hope to see at least a small recovery in demand as inflation eases and consumer confidence stabilises. While we await those changes to take effect, it’s heartening to see manufacturers exploring the potential of new technologies, including Artificial Intelligence.”
Luke Wilson, Director at FRP said: “Experience shows that businesses which continue to invest in bolstering their operations through economic uncertainty usually emerge best positioned to benefit from more stable conditions, so it’s encouraging to see such a strong appetite to do so amongst the region’s manufacturers. The priority for business leaders should now be to identify the areas in which funding can most effectively be channelled to drive growth.”
Rising wages will also remain an enduring
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