The manufacturing sector, which makes up about a tenth of the UK economy, enjoyed the strongest pick-up in new work since the start of 2014 and exceeded expectations in April 2017, according to the latest Markit/CIPS Purchasing Managers’ Index (PMI).
Many of the manufacturing companies in the Midlands, which generates over one fifth of the UK’s manufacturing output, are expected to have benefitted from the UK’s fastest rate of growth in the sector in recent years.
The survey found the main source of new work came from the domestic market, but orders from overseas were “above normal” due to a combination of better global economic conditions and the weakening of the pound. Highest demand reportedly came from North America, Europe, Africa and Brazil.
However manufacturers have also reported that the fall in the value of the pound was leading to higher costs and materials such as chemicals and plastics are more expensive.
Andy Bewick, Corporate Services & International Partner at Dafferns said,
“There are undeniable opportunities for the region’s manufacturers at the present time. It is important for companies to take advantage of these prospects whilst ensuring that business risks are being well managed. For example, exposure to the risks of foreign currency fluctuations can be mitigated by careful planning and consideration of hedging strategies.”
The Midlands economy is also still suffering from a shortage of skilled workers, an issue which is of concern to many of the Midlands manufacturers. The proportion of highly skilled people is currently about 15% below the UK average. Many businesses within the sector are concerned about the further impact that the exit of the UK from the EU will have on the skills gap.
“With another UK general election imminent and the exit of the UK from the EU following the triggering of Article 50, it would be wise for UK manufacturers to remain cautious and be well prepared.
Whilst the Midlands Engine Strategy goes some way to allocate funds to address the skills gap, it remains to be seen whether the funds will be sufficient enough and reach those areas where it is most needed.”
For further information or if you have any questions please contact Andy Bewick.