Manufacturing News – Late October 2021

The Autumn Budget 2021 took place as the UK focuses on recovery from a period of unprecedented global economic uncertainty and challenge. Some of the key announcements to impact the manufacturing sector are:

Infrastructure, transport and investment

As part of his plan for levelling up transport across the UK, Rishi Sunak put forward a number of initiatives and plans for investment across infrastructure.

  • Increased investment to support London-style transport across the country.
  • England’s city regions will receive £6.9bn to spend on train, tram, bus and cycle initiatives.
  • £21bn investment on the roads and £46bn on the railways to improve overall journey times between cities.
  • Research and Development (R&D) spending will reach £22bn by 2026-27 and there will be £20bn invested in R&D by 2024-25.

UK manufacturing output volumes in the quarter to October grew at a similarly firm pace to September, according to the latest quarterly CBI Industrial Trends Survey.

The survey of 263 manufacturers reported output increasing in 11 out of 17 sub-sectors, with growth driven by the chemicals, aerospace, and food, drink & tobacco sub-sectors. Firms expect output growth to pick up substantially in the next quarter.

Total new orders grew at a slower, but still strong, pace compared to July, with the deceleration driven by an easing in domestic orders growth. Meanwhile, export orders increased at a broadly similar pace to last quarter. Manufacturers expect total new orders growth to pick up next quarter, led by an acceleration in domestic and export orders.

Concerns about supply shortages in the next three months escalated further in October. Almost two-thirds of firms cited availability of materials/components as a factor likely to limit output next quarter (highest share since January 1975).

Manufacturers also expressed heightened concerns about labour shortages affecting future output, with two-in-five firms worried about a lack of skilled labour (highest since July 1974) and nearly a third concerned about availability of other labour (a survey-record high).

The manufacturing sector continues to face acute cost and price pressures. Firms reported that average costs growth in the quarter to October remained broadly in line with July, which saw the fastest growth since 1980. Rapid cost growth has continued to feed into price pressures, with average domestic and export prices growing at their fastest rate since April 1980 and April 2011, respectively.

Looking ahead to the next three months, costs growth is set to speed up further, with both domestic and export price inflation expected to accelerate.

The latest Contract Manufacturing Index shows that the subcontracting market grew strongly in July and August but fell back in September amid concerns over material, staff and transport shortages.

This meant that suppliers were unwilling to quote without knowing what their costs would be, while buyers were hesitant about placing orders due to uncertainty over demand and pricing.

The Index for the third quarter of 2021 stood at 117, a 52% increase on the previous quarter and just slightly (5%) down on the equivalent quarter in 2020 when the market bounced back after the first Covid-19 lockdown.

The strong growth in July and August followed by a falling back in September mirrored the results seen last year. The CMI of 78 for September was comparable with the overall CMI of 77 for the second quarter of this year.

Research by Make UK shows that 1.2 million jobs could be created in green manufacturing if Government supports business confidence in achieving Net Zero targets.

Make UK says that Britain’s manufacturers are leading the charge towards Net Zero as the sector moves to slash greenhouse gas emissions, cut energy use and move to renewable and sustainable energy sources.

According to the research, published by Make UK and Sage, manufacturers are powering ahead with training staff in the latest technologies, so they have the right skills to embrace digital and green solutions.

The research – ‘Unlocking the Skills Needed for a Digital and Green Future’ – shows employees are being taught the latest automation, such as smart monitoring, remote sensing, data analytics and clean production.

And 70% of businesses have invested in training for their employees in the last year to improve their digital application knowledge. There is much at stake – 1.2million jobs could be created in the manufacturing and construction sector in a green economy by 2050. And digitally enabled energy efficiency could save UK business £6billion by 2030.

The success of the UK’s manufacturing sector will be central to Government’s ability to deliver on its national ambitions to level up the whole country, reach Net Zero by 2050 and become a global science super-power

Today, five trade associations together representing sectors with nearly 800,000 employees, annual turnover of £338.2bn and £166bn in exports, publish a joint report setting out policy recommendations to maximise the potential of UK manufacturing to generate and sustain high value jobs and growth.

The Manufacturing Five – the Association of the British Pharmaceutical Industry (ABPI), ADS, the Chemical Industries Association (CIA), the Food and Drink Federation (FDF) and the Society of Motor Manufacturers and Traders (SMMT) – make recommendations on how Government can work with them to seize new economic opportunities, sustain jobs, and deliver growth and prosperity as we emerge from the pandemic.


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