South East: Manufacturers positive about 2018 prospects, says BDO/EEF survey

South East manufacturers have begun 2018 in the same upbeat manner they left last year on the back of the continued improvement in global demand together with a pick-up in the UK market, according to a major survey published by EEF, the manufacturers’ organisation and accountancy and business advisory firm BDO LLP.

According to the EEF/BDO Manufacturing Outlook Q1 survey, manufacturers are continuing to ignore the ongoing political uncertainty at home as improved global demand, from European markets in particular, continues to feed growth across most of the manufacturing supply chain.

This strong performance, has led EEF to upgrade growth forecasts for manufacturing for this year and next, meaning the sector will again outperform the economy overall in 2018.

According to the survey, both output and total orders remained in very positive territory with output rising to a historic high of +49% and total orders also at a historic high of +53%, the best performance for over three years.

This positive picture is reflected in healthy recruitment intentions by South East companies which surged to +43% whilst investment intentions more than doubled from the previous quarter to +34%.

As a result of the strong performance by manufacturing through 2017 and the positive outlook for 2018 EEF has upgraded its forecasts for the sector to +2.0% from 1.4% previously. This is faster than the UK economy overall where EEF is forecasting growth of 1.5% in 2018. Next year we see growth slower growth across the economy and manufacturing with expansion of 1.3% and 0.6% respectively.

Commenting, Jim Davison, regional director for EEF in the South East, said: “Manufacturing activity stepped up a gear through 2017 providing industry with some decent momentum coming into this year. The importance of a buoyant global economy to export-focused manufacturing sectors is again reinforced, with growing overseas demand encouraging international manufacturers to ramp up their investment which in turn is spurring particularly strong activity in UK capital goods sectors.

“While this will help top line growth in UK industry and the wider economy it’s also important that the global race to increase investment and adopt new technology is not one in which the UK is left behind. As the Chancellor sets out some thinking about longer term economic priorities in his Spring statement next week, manufacturers will want to see a focus on how the new industrial strategy can help cut through Brexit uncertainty and turbo-charge investment ambitions right across manufacturing supply chains.”

Arbinder Chatwal, director and head of manufacturing at BDO in Southampton, said: “Throughout 2017, the UK manufacturing sector proved itself to be remarkably resilient and delivered a strong overall performance and it is promising to see this is being continued into the first quarter of 2018. With healthy output and order balances and growing export demand, manufacturers in the South East are continuing to recruit and invest – providing a much needed boost to the UK economy.

“These results do indicate continued and growing opportunities in the EU and around the world but the sector also faces the challenges of the uncertainty of Brexit and the increasing use of automation and Industry 4.0. Therefore, it is more important than ever for the Government to provide real clarity on its plans for a working and effective Industrial Strategy and Brexit. Manufacturers will need this clarity if they are to continue to commit to the significant capital investments required to support long-term growth.”