It might be an uphill battle…but its progress
Monday October 9, 2023
Restructuring Advisory Director, Luke Wilson, reflects on the manufacturing sector's economic activity.
From my experience every battle in business or life always has two sides, the one which is glaringly obvious, the fight itself – the difficulties and the alarming thoughts of, how do I find a way through – then the other side, beneath the surface, there is an abundance of opportunity for change, growth and learning. This is no different for the current state of flux that the manufacturing sector is facing.
Last year we conducted a survey into the manufacturing sector and the challenges that faced the industry and its leaders – at that point in time the backdrop of the economic challenges ahead was staggering, you might even say defeating. But what was inspiring was the optimism and fortitude in approach that the sector was taking. The majority of people we approached believed they would survive the 12 months ahead. A really important observation to make for an industry, that Henry Anson, Director at Hennik Group,-publishers of the The Manufacturer describes as the “beating heart of the UK economy”.
In fact, ONS figures from June this year showed that the UK manufacturing sector was the largest contributor to production, which in turn was the largest contributor to GDP growth. A hugely encouraging statistic in the wake of seemingly endless negative outlooks and predictions.
Both The Guardian and Reuters recently reported that UK manufacturers have cut hiring plans amid a sharp slowdown in demand and output. Make UK, Britain’s main manufacturing body, forecast that output will fall by 0.5% this year and 0.4% in 2024 as a result of a “potent cocktail of rising interest rates, cost of living and slowing of overseas markets” says Verity Davidge, policy director.
She went onto to say that “as a result, they [manufacturers] are now battening down the hatches in the expectation that the next year is going to be anaemic at best and, potentially, much harder”. Words like ‘anaemic at best’ don’t exactly give you the warm fuzzies. Given the ongoing increase in company insolvencies so far this year in many industries from automotive, private equity and gas fields, to schools and building contractors, there is no doubt everyone is finding it hard – but this sort of news will put the industry on red alert.
Innovation continues to be a point of criticism for UK manufacturers, and our friends across the pond seem to be progressing a little faster than us in this arena according to the Times, and Scott White, Chief Executive of Pragmatic – a Cambridge based semiconductor business, who has been appointed to a government panel to review strategies for the sector. White says that “we’re [the UK] really, really good at inventing things, but we tend not to capture the full value of them because we have this view that manufacturing isn’t important”. So clearly more can be done here.
However, the Bank of England’s decision not to raise interest rates last Thursday, after 15 consecutive rises will be some respite to this outlook, even if just a little, and goes to show the slight paradoxical nature of what we are seeing in the relationship between consumer behaviour, economists, advisers outlook, and actual reality.
So what is the reality here, given two converse views and reporting of the data in the market, coupled with the ongoing positive attitude that the industry seems to be showing. The reality is no one knows what is going to happen and that right now it is tough, but there is still some good progress being made along the way in areas like AI (whatever your views on this may be), and the race to net zero, as well as innovation despite criticism. So whilst it is an uphill battle, it is progress, for Britain’s heartbeat.
From my own personal experience of challenge, sometimes in the thick of it, all we can do is focus on taking the next best action, and then letting go of the outcome. Easy for me to say – but for business owners in this sector it will be a stressful time. Having a good team around you as a director cannot be underestimated in the ability to navigate your way out. Seeking counsel, having the right people in the right places from finance, to HR to logistics, it all matters.
Interestingly our manufacturing survey respondents this year again showed signs of optimism – look out for the report launch in the coming weeks.
ONS figures from June this year showed that the UK manufacturing sector was the largest contributor to production, which in turn was the largest contributor to GDP growth.Luke Wilson Restructuring Advisory