Around half of UK manufacturers are more feeling positive about the country’s international attractiveness but many have issued warnings about overseas competition and the impact of high energy prices on profits, a new report has found.
Make UK and PWC’s Executive Survey 2024 found that the majority of Britain’s manufacturers (52.7%) are now viewing the UK as a more competitive place to base their operations.
Only 31% of members felt the same in the 2023 version of the annual survey, which surveys over 200 companies to get a pulse on how the UK’s factories and producers are feeling about the year ahead.
Stability welcomed
Paul Brooks, Institute of Export & International Trade's (IOE&IT) UK manufacturing lead, said:
“As we enter 2024, it is encouraging to note the leaders of the UK manufacturing sector are optimistic but, as always realistic about the medium term. Businesses need stability and over the last quarter of 2023 there was evidence that a longer term approach to economic policy was developing.
“We would like to see this continue into 2024 as there will still remain several supply chain challenges that our manufacturers will need to overcome.”
Make UK’s CEO, Stephen Phipson, said that the last few years had been a “rollercoaster of emotions” for the industry, but that the sector was continuing to demonstrate resilience. He added:
“We are now seeing some hope that conditions may be improving, amid a more supportive and stable policy environment, but this must be cemented within a long-term industrial strategy.”
Government measures such as the new advanced manufacturing plan, the full expensing tax relief being made permanent and the extension of the ‘Made Smarter’ scheme, are cited by businesses as being behind the increase in optimism.
Almost half (48%) of the respondents said they are generally holding back on investment until they have ‘policy certainty’ and stability in government decision-making.
The report said that if a “stable policy environment is unlocked, we may see a significant increase in the level of business investment.”
Issues remain
Overall, 44% of manufacturers expect improvements in the industry, with 30% predicting that supply chain issues will continue to dissipate over the course of the year. The study was conducted before the outbreak of the Suez Canal crisis and associated shipping disruptions.
This positivity comes in spite of the fact that 41% of surveyed firms think that the domestic economy will deteriorate over the course of the year.
Another risk factor for businesses was the continued high costs of production, as the government’s Energy Bill Support Scheme is set to end 31 March 2024. Over half (53.2%) of firms cited energy costs as a risk for the year ahead, with 47.3% saying the same about other input costs.
Competition
Overall, around half of UK manufacturers are more positive about the UK’s attractiveness, with almost a third believing that the country is more competitive than Germany and France.
In September last year, the UK overtook France to become the eight largest global manufacturer
However, firms said that were wary of the threat to their businesses posed by rivals in the US, India and China, particularly since the introduction of US president Joe Biden’s Inflation Reduction Act.
For exporting manufacturers, the EU remained the top market of choice with almost three quarters (74%) of respondents selling to Europe. The US (48%) and Northern Ireland (37%) came second and third.
Almost a quarter (23.4%) said that exporting to new countries was a major opportunity for them in the year ahead.