South East: Manufacturing grows in importance in regional economy

A new report from Make UK, the manufacturers’ organisation and accountancy and business advisory firm BDO LLP shows that manufacturing is occupying an increasingly important role in the London and South East economy on the back of the global rush towards automation and new technologies.

• Region accounts for 15.3% of total manufacturing output, worth £28 billion
• 412,000 manufacturing jobs, 3.8% of the Region’s total workforce
• London & South East accounts for a quarter of UK total manufacturing exports, the largest proportion in the UK
• The EU is the top export destination though below the national average presenting  diverse export picture overall

The combined region is now the UK’s second largest manufacturing region by output, worth £28 billion in the last year, but the UK’s biggest region in terms of exports, accounting for a quarter of the overall UK total (24.9%).

The report, analysing the overall status of industry in the region over the last 12 months shows that, overall, London and the South East has consistently been the best performing region across all indicators, despite a small drop in output which is consistent with more uncertain economic and political conditions.

The recent good performance is strongly linked to the structure of the manufacturing sector in the region, being the main hub for electronics which accounts for more than 10% of output and growing in importance and size. The sector is the second largest behind food and drink (the UK’s biggest manufacturing sector overall) and metals in third.

While London and the South East is the UK’s biggest contributor to UK exports is has a more diverse spread of destinations than other region with its exposure to the EU below the national average (46%). Asia is the second largest market (21.3%) followed by North America (17.3%).

Commenting, Jim Davison, director of member engagement for Make UK in London and the South East, said: “The report shows that industry continues to have an increasing role to play in the success of London and the South East economy. The last year has seen a strong performance, despite the uncertain political environment and global markets.

“There are well documented challenges going forward, not least Brexit and the global economic downturn but, despite this, the global shift to automation and emerging technologies is likely to provide continued growth those companies who invest and innovate will still have the best long term prospects and can contribute to raising the productivity performance of the region and the UK as a whole.”

Richard Willis, head of manufacturing at BDO in London, said: “The recent emergence of London and the South East as a manufacturing powerhouse demonstrates that despite times of economic slowdown there is still a positive story to be told.

“However, companies are already holding back on investment as a result of the prolonged period of Brexit instability and risk lagging behind their global competitors when it comes to the uptake of industry 4.0 processes and technology. It will be difficult for many manufacturers to regain lost ground in these areas particularly as digital transformation picks up pace.

“The region’s increasingly significant contribution to the UK economy should not be underestimated, manufacturers must continue to take advantage of its high exposure to the thriving electronics sector.”