Manufacturers brace for two years of ‘anaemic’ growth, BDO finds

Britain’s manufacturers are facing the prospect of two years of “anaemic” growth, with the sector expected to remain flat this year, according to the Q1 Manufacturing Outlook survey by Make UK and BDO. 

The survey revealed that the balance of output fell significantly from 20% to 5% in Q4 2023. However, it is expected to rebound to 31% in the next three months, as total orders remained at 7% and are forecasted to improve to 24% in the next three months.  

In the last quarter, both UK and export orders were flat at 1% but, looking forward, they are both forecast to improve to 21% and 19% respectively. This will resume the pattern since the pandemic, when UK orders have consistently exceeded export orders, the only occasion when this was reversed being the final quarter of last year. 

According to Make UK, while this is to some degree a reflection of weak demand in overseas markets, it is also due to the impact of leaving the EU given it fits with other data on UK trade.

The scramble to attract and retain talent also shows no signs of abating, with recruitment intentions remaining strong at 12% and increasing next quarter to 14%. 

Investment intentions also increased from 10% to 15%, continuing the positive trend in every quarter bar one since the beginning of 2021. This would seem to indicate a positive response to the announcement on full expensing by the chancellor in the Autumn Statement.

Make UK’s latest economic forecasts are for just 0.1% growth in manufacturing this year and 0.8% in 2025. GDP is forecast to grow 0.6% this year and 1.6% in 2025. 

Fhaheen Khan, senior economist at Make UK, said: “While manufacturers’ own confidence remains robust, the overall prospects for the sector are weak for the foreseeable future. The UK economy has a fundamental growth problem which a business as usual policy process simply will not address.

“The next government of whatever colour must address this fundamental problem as a matter of national urgency, beginning with a long-term industrial strategy which will really shift the dial on the UK’s economic performance.” 

Richard Austin, head of manufacturing at BDO, added: “Manufacturers have continued to show their ability to overcome wave after wave of challenges, but they cannot continue to do this indefinitely without some more long-term support from the government. 

“Now more than ever there is a strong case for policies and measures that will help UK manufacturers invest and expand. Despite the challenges, demand for labour and investment intentions remains strong and the next few months will be critical to the sector.”