Recession fears ease as South East manufacturing bounces back – Make UK/BDO survey
Improvements in domestic and global markets have driven a rebound in activity for South East manufacturers, according to the Q1 Manufacturing Outlook survey from Make UK and BDO.
The findings show a marked pick up from the final quarter of 2022, easing fears of a significant recession for industry this year. This comes alongside a gradual upturn of UK and European PMIs, as well as in the Chinese market.
Strong demand for electronics, one of the largest sectors in the South East, has proven a significant factor in the resurgence. Make UK and BDO cite a number of potential factors, such as companies investing in digitalisation and extra capacity to counter labour shortages, or seeking to capitalise on the super deduction scheme which ends later this month.
During Q1, the South East saw a particularly strong order balance of +33 per cent, driven primarily by export orders for electronics from EU markets.
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Jim Davison, South East Region Director at Make UK, said: “Manufacturers in the South East have seen a rebound at the start of the year as conditions have improved in their major markets and, business confidence has improved.
“However, one swallow doesn’t make a summer and it is far too early to say the worst has passed given the significant challenges the economy faces.
“The Budget should help boost investment in the short to medium term, although ideally, full expensing should be made permanent to better reflect the investment cycle for manufacturers.”
Despite promising trends, Make UK has maintained its forecast of a contraction for manufacturing in 2023, although the most recent prediction for overall output of -3.3 per cent compares favourably to last quarter’s -4.4 per cent.
Mark Hutton, Head of Manufacturing at BDO in the South East, echoed this caution: “Inflationary pressures are still very evident for UK manufacturers with increased costs still being passed on. The worst of conditions for the sector may still be to come.
“Recent government announcements do little to reassure the sector. Manufacturers need certainty on a range of fronts, including long-term energy support and assistance to build a sustainable workforce.”
South East businesses are nonetheless confident that both UK and overseas orders will continue to slowly improve throughout the year, as the encouraging signs from recent figures have spurred new recruitments and investments.
Make UK currently forecasts slight growth in overall output of 0.8 per cent for 2024, following this year’s contractions.
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