Product Details Supplier Info More products

As 2011 came to a close, UK manufacturers were looking at a complex and uncertain environment in market terms.

Some of the data for Q4 2011 and forecasts for 2012 suggested that growth could be problematic in the coming year (although this picture alters sector by sector) and there were some worrying headwinds emanating from the eurozone.

According to the EEF’s Manufacturing Outlook (December 2011): ’In the last few months, however, economic headwinds have picked up considerably. The eurozone crisis has progressively worsened, to the point where major European economies such as Italy, Spain and even France are being sucked into the spiral of increasing interest rates on their borrowing. Manufacturing cannot escape the impact of this crisis. More than half the sector’s exports are destined for European markets. Customers in these markets are becoming increasingly nervous about their short-term prospects and this is spilling into orders. Exports to other destinations are growing fast, but off a relatively low base.’

Also lurking in the mix is the Cameron ’veto’ of an EU-wide treaty change to deal with the eurozone crisis and the suggestion that the UK could be moving
to the fringes of Europe. However, it is far too early to quantify what this means concretely for the manufacturing sector.

The irony of this situation is that the government has begun to match its rhetoric on advanced manufacturing with a range of initiatives and schemes, and it’s not stretching the point too much to suggest that manufacturing is, once more, a fashionable and aspirational topic for our leaders.

There were a number of surveys and reports at the end of last year that suggested the coming year could be a more difficult one for UK manufacturers.

According to the CBI’s monthly Industrial Trends survey, there was a further slight weakening in total order books in December 2012, while export orders remained well below their long-run average. Of 434 manufacturers responding, 18 per cent reported total order books to be above normal, while 41 per cent said that they were below. The resulting survey balance of -23 per cent was the lowest since October 2010 (-28 per cent). Export demand also remained depressed, according to the CBI. While 12 per cent reported export order books to be above normal, 44 per cent said that they were below. The resulting balance of -32 per cent is the lowest since January 2010 (-33 per cent) and still well below the long-run average (-21 per cent). The survey indicates that manufacturers expect to reduce production over the next three months. While 24 per cent of firms believe output will rise in the next quarter, 32 per cent expect to lower production.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) pointed to signs of stability in production in December 2011, however, over Q4 as a whole, output and new orders exhibited the sharpest falls since Q2 2009.

The seasonally adjusted PMI rose to 49.6 in December 2011, up from a revised reading of 47.7 in November 2011. The PMI has remained below the 50 no-change mark throughout Q4 2011 and its average during the quarter is the weakest since Q2 2009.

In the eurozone, PMI rose slightly to 46.9 in December, up from 46.4 the previous month, but the average PMI reading in Q4 2011 was nevertheless the weakest since Q2 2009. Levels of production and new orders fell across all nations for the second month running.

This data has impacted on predictions for growth in 2012. The EEF says: ’We now expect the sector to expand by 0.9 per cent compared with 2.2 per
cent previously. Across the economy as a whole, we have nudged down our expectations for the remainder of 2011 and 2012. GDP is expected to expand by just 0.9 per cent and one per cent respectively.’

To some extent, the outlook is dependent on sector differentials and potential for export orders. For example, the Society of Motor Manufacturers and Traders (SMMT) thinks the automotive industry is looking at strong prospects for 2012.

This picture is borne out by the EEF, which says: ’Announcements of investment programmes from several major motor-vehicle manufacturers in the UK are indicative of relatively robust confidence in the medium term for the sector. Much of this is driven by very strong demand coming from emerging markets, particularly China. Our forecasts have come back somewhat for both 2011 and 2012, but we still expect growth of 11 per cent and 4.4 per cent respectively. The mechanical equipment sector also benefits from having strong growth feeding through from emerging markets. The sector consistently appears robust and, in fact, our 2011 forecast has now been revised up to eight per cent before growth falls back to 2.2 per cent in 2012.’

In this positive vein, the PMI Index says that in December 2011 new export orders rose for the first time in five months, reflecting increased levels of work from Germany, Eastern Europe and China. Price and supply-chain pressures are also judged to have remained relatively subdued.

Lyndon White

News analysis — what’s in store for UK manufacturing in 2012?

As 2011 came to a close, UK manufacturers were looking at a complex and uncertain environment in market terms.

Some of the data for Q4 2011 and forecasts for 2012 suggested that growth could be problematic in the coming year (although this picture alters sector by sector) and there were some worrying headwinds emanating from the eurozone.

According to the EEF’s Manufacturing Outlook (December 2011): ’In the last few months, however, economic headwinds have picked up considerably. The eurozone crisis has progressively worsened, to the point where major European economies such as Italy, Spain and even France are being sucked into the spiral of increasing interest rates on their borrowing. Manufacturing cannot escape the impact of this crisis. More than half the sector’s exports are destined for European markets. Customers in these markets are becoming increasingly nervous about their short-term prospects and this is spilling into orders. Exports to other destinations are growing fast, but off a relatively low base.’

Also lurking in the mix is the Cameron ’veto’ of an EU-wide treaty change to deal with the eurozone crisis and the suggestion that the UK could be moving
to the fringes of Europe. However, it is far too early to quantify what this means concretely for the manufacturing sector.

The irony of this situation is that the government has begun to match its rhetoric on advanced manufacturing with a range of initiatives and schemes, and it’s not stretching the point too much to suggest that manufacturing is, once more, a fashionable and aspirational topic for our leaders.

There were a number of surveys and reports at the end of last year that suggested the coming year could be a more difficult one for UK manufacturers.

According to the CBI’s monthly Industrial Trends survey, there was a further slight weakening in total order books in December 2012, while export orders remained well below their long-run average. Of 434 manufacturers responding, 18 per cent reported total order books to be above normal, while 41 per cent said that they were below. The resulting survey balance of -23 per cent was the lowest since October 2010 (-28 per cent). Export demand also remained depressed, according to the CBI. While 12 per cent reported export order books to be above normal, 44 per cent said that they were below. The resulting balance of -32 per cent is the lowest since January 2010 (-33 per cent) and still well below the long-run average (-21 per cent). The survey indicates that manufacturers expect to reduce production over the next three months. While 24 per cent of firms believe output will rise in the next quarter, 32 per cent expect to lower production.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) pointed to signs of stability in production in December 2011, however, over Q4 as a whole, output and new orders exhibited the sharpest falls since Q2 2009.

The seasonally adjusted PMI rose to 49.6 in December 2011, up from a revised reading of 47.7 in November 2011. The PMI has remained below the 50 no-change mark throughout Q4 2011 and its average during the quarter is the weakest since Q2 2009.

In the eurozone, PMI rose slightly to 46.9 in December, up from 46.4 the previous month, but the average PMI reading in Q4 2011 was nevertheless the weakest since Q2 2009. Levels of production and new orders fell across all nations for the second month running.

This data has impacted on predictions for growth in 2012. The EEF says: ’We now expect the sector to expand by 0.9 per cent compared with 2.2 per
cent previously. Across the economy as a whole, we have nudged down our expectations for the remainder of 2011 and 2012. GDP is expected to expand by just 0.9 per cent and one per cent respectively.’

To some extent, the outlook is dependent on sector differentials and potential for export orders. For example, the Society of Motor Manufacturers and Traders (SMMT) thinks the automotive industry is looking at strong prospects for 2012.

This picture is borne out by the EEF, which says: ’Announcements of investment programmes from several major motor-vehicle manufacturers in the UK are indicative of relatively robust confidence in the medium term for the sector. Much of this is driven by very strong demand coming from emerging markets, particularly China. Our forecasts have come back somewhat for both 2011 and 2012, but we still expect growth of 11 per cent and 4.4 per cent respectively. The mechanical equipment sector also benefits from having strong growth feeding through from emerging markets. The sector consistently appears robust and, in fact, our 2011 forecast has now been revised up to eight per cent before growth falls back to 2.2 per cent in 2012.’

In this positive vein, the PMI Index says that in December 2011 new export orders rose for the first time in five months, reflecting increased levels of work from Germany, Eastern Europe and China. Price and supply-chain pressures are also judged to have remained relatively subdued.

Lyndon White

View full profile