Regional manufacturing ‘performance gap’ widening

According to the final 2019 Regional Manufacturing Outlook survey compiled by Make UK and business advisory BDO, the performance gap between London and the South East and the rest of the country continued to grow in 2019.

Part of the reason for this is the structure of manufacturing in different regions. The two largest manufacturing sectors in London and the South East, food & drink and electronics, both performed well in 2019.

In comparison, manufacturing in the North West is much more dependent on the transport equipment, pharmaceuticals and chemicals sectors, which had a more uncertain year.

The motor industry in particular has been hit hard by difficult trading conditions and is now at its weakest level since the financial crisis. Meanwhile, stockpiling to protect against a no deal Brexit provided an artificial boost for pharmaceuticals and chemicals in early 2019, which could now come back to bite these sectors as customers begin to draw down their stock levels.

Business confidence in the North West was below the UK average at the end of 2019 and investment intentions are now half the level they were just a year ago, despite overall output remaining above the UK average through 2019.

Comparatively, investment intentions have remained solid in the South East, with companies much more likely on average to invest in new technologies linked to the fourth industrial revolution such as robotics and AI.

Tom Lawton, Head of Manufacturing at BDO, said:

“The old north-south divide is unfortunately still very much in play when it comes to industrial performance. Currently, some sectors such as automotive are also facing a potent combination of structural factors that are posing great challenges for those companies and supply chains who depend on them.

“Manufacturers will hope the start of a new decade and a fresh government will secure a renewed focus on delivering a long term, modern industrial strategy to ensure industry can be at the forefront of tackling the societal and technological challenges we face.”