UK manufacturing is forecast to see a 12% drop in output for 2020, with growth forecasts for 2021 also downgraded. But firms remain optimistic and are looking to overseas markets for growth.
A major survey published by Make UK and business advisory firm BDO shows that output and orders improved in Q4 of 2020 but are still substantially below historic averages.
The balance in outputs rose to -5 per cent in Q4, a significant improvement compared to -36 per cent and -56 per cent in the previous two quarters. However, the balance is forecast to remain negative going into 2021.
The balance in orders follows a similar pattern, but the export order balance is forecast to drop sharply in Q1 of 2021. This reflects concerns many manufacturers have about the impact of the end of the EU Transition Period on exports, Make UK said.
Stephen Phipson, Chief Executive of Make UK, commented:
“Manufacturing has stepped back from the abyss that it stared into earlier in the year. But, make no mistake it is going to be a long haul back.”
A separate survey by Santander, published in The Manufacturer, shows that manufacturers are particularly concerned about any potential tariffs they face, with 84 per cent expecting new customs arrangements to increase their costs.
Nevertheless, Santander’s research suggests that the sector is still largely optimistic in the medium-to-long-term, and that manufacturers are more likely than businesses in other sectors to see overseas markets as their potential source of future growth.
Three in ten of the manufacturers surveyed said trading internationally is now more important as a result of COVID-19. The same amount expect to expand their operations in the EU over the next 12 months, while 35 per cent foresee growth in North America and 22 per cent foresee growth in the Greater China region.