Manufacturing News – Late August 2022

Growth in manufacturing output and orders eased in the quarter to July, slowing to more typical rates of expansion following a period of exceptionally strong growth over the previous year. Average costs and prices continued to rise sharply, although growth eased from recent highs.

Optimism within the sector fell for a third consecutive quarter. However, investment intentions generally improved, and employment within the sector continued to grow at a robust pace, though less quickly than expected last quarter (for the third quarter running). Concerns over shortages of labour and shortages of components and materials remained acute, but off their recent highs.


UK economic growth slowed to a crawl in July, registering the slowest expansion since the lockdowns of early-2021. Although not yet in decline, with pent-up demand for vehicles and consumer-oriented services such as travel and tourism helping to sustain growth in July, the PMI is now at a level consistent with just 0.2% GDP growth. Forward-looking indicators suggest worse is to come. Order books are now deteriorating for the first time in one and a half years as inflows of new work are insufficient to keep workforces busy, which is usually a precursor to output and jobs being cut in coming months. Raw material buying has already slumped and hiring has slowed as companies reassess their requirements for the coming months.


The latest NatWest Sustainable Business Tracker shows encouraging signs that UK businesses are seeking to reduce the carbon footprint of their supply chains.

Nearly half of all SMEs (46%) have already switched to a domestic supplier due to sustainability concerns. A further 20% are looking to re-shore at least part of their supply chain to boost sustainability during the year ahead. This suggests that approximately two-thirds of SMEs (66%) will have switched at least some of their external vendors to domestic suppliers by the summer of 2023. On a five-year horizon, this figure rises to three-quarters of SMEs.


Manufacturers are being urged to accelerate technology adoption to adjust to the economic challenges around the supply chain, energy costs, post-Brexit and COVID.

Made Smarter, the movement connecting UK manufacturing industries to digital tools, conducted a survey of some 200 SME manufacturers in the North West.

The results highlighted how the last two years affected them, and their approach to digitalisation and their priorities going forward.

The survey revealed while many (35%) makers, particularly smaller businesses, are focussed on survival after a turbulent few years, achieving growth by improving productivity and adopting digital technologies are key drivers for SMEs.


A new report out from Make UK, the manufacturers’ organisation, and accountancy and business advisory firm BDO shows that manufacturing remains central to the success of the West Midlands, with the sector accounting for 14.1% of the region’s economy, way above the national average of 10%.

According to the report, which analyses the overall status of industry in the region over the last twelve months, the West Midlands was initially behind other regions in recovering from the pandemic given the region’s dependence on the automotive sector, which accounts for a third of the region’s manufacturing output.


The UK regions and Nations that voted for Brexit have increased their dependence on the EU for manufacturing exports, while the European market remains the overwhelming favoured destination for the sector.

The findings come from the Annual Regional Manufacturing Outlook published today by Make UK and business advisory firm BDO. The report examines the contribution of manufacturing to the economies of every English Region as well as the devolved nations. It analyses both the most recent official data, as well as Make UK’s own quarterly data across a wide range of indicators including output, orders, employment, investment intentions.

The analysis of official data from 2021 shows that the EU remains overwhelmingly the dominant market for UK goods with an overall average level of 49% of exports going to the bloc. Wales (60%), the North East (58%), East Midlands (51%) and East of England (48%) all saw their share of manufacturing exports to the EU increase while Yorkshire & Humber (57%) stayed the same. The South West, Scotland and Northern Ireland also saw their shares increase.

Given the fact the EU remains by some distance the most important export destination for UK goods Make UK believes it is essential the new Prime Minister takes immediate and positive steps to renew the trading relationship with the bloc and renews additional support to boost exports, especially for SMEs.


The latest Contract Manufacturing Index shows that despite underlying volatility, the UK subcontract manufacturing market grew steadily through the second quarter of 2022. Although the market was up overall for the quarter, there was a sharp drop from March to April.

The overall figures also disguise the differences in the markets for machining and fabrication services. The machining market was down by 10% – accounting for a third of all business, while fabrication was up by 42% on the previous quarter and accounted for 57% of the market.




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