Against the odds: The future of UK manufacturing

87%
Are confident demand will increase over the next 12 months

19%
Say improving ESG factors is a top investment priority

24%
Are using AI machine learning/automation to its full potential

Download the report

Against the odds: The future of UK manufacturing

On the up

An optimistic view

When we published our first report on the manufacturing sector landscape last year, the short-term outlook was challenging – particularly given its proximity to the now infamous ‘mini-Budget’.

Many of the factors that were causing concern to manufacturers then are still in play at the time of writing. Interest rates have increased significantly and the cost of-living crisis has instilled fragility in consumer confidence. At the same time, operating costs – including energy and wages – remain high, while post-Covid and Brexit-related supply chain challenges persist.

Accordingly, there is evidence that output volumes are falling and order books are declining in some areas of the market, contributing to a mixed outlook for UK manufacturing - and against the odds, the data we received indicates a largely optimistic view from manufacturers.

Get in touch

David Hudson

David Hudson

David Hudson

  • Partner
  • Restructuring Advisory
  • London
Allan Kelly

Allan Kelly

Allan Kelly

  • Partner
  • Restructuring Advisory
  • Newcastle, Sunderland

A hopeful perspective despite operational issues

%

Are confident in their ability to trade through the next 12 months.

%

Expect their suppliers to continue trading through the year ahead.

%

Said demand has grown in the past year with just 8% saying demand had fallen.

%

Of respondents are confident that demand will increase over the next 12 months.

Investing in growth

Which financial initiatives will support manufacturers - and at what cost?

Much has been made of expensive initiatives in the US and Europe to hand manufacturers various grants, incentives and tax breaks to support the transition to green technologies.

That stands in contrast to the UK, where investment has stalled in the face of ongoing economic uncertainty.

So, it’s reassuring to learn that four in five (81%) of the manufacturers we surveyed are planning to invest at least the same if not more than they did last year, with only 13% planning to invest less and just one in 20 not planning to invest at all (5%).

Regionally, the North West was most at risk of stagnation, with a quarter (25%) of firms planning to reduce investment. The region is home to a high concentration of aerospace manufacturers, which have struggled with supply chain disruption more than most.

Our survey found that those stopping or reducing investment are primarily doing so to conserve resources amid uncertainty (52%) – although just under a third (30%) said that borrowing has become too expensive in light of increases to the Bank of England base rate.

Key themes

Discover more about emerging themes by selecting the tabs below

Energy

Energy

Despite the wider manufacturing sector’s natural resilience, challenges abound. Inflationary factors have been – and will continue to be – the biggest issues when it comes to business risk, and energy is front of mind as firms look ahead.

When asked about the biggest risks to manufacturers over the past 12 months, those surveyed flagged increased energy costs (37%), higher material costs (31%), growing wage bills (21%) and increased import and shipping costs (18%) as their most pressing issues.

Concerns re imports and shipping are perhaps surprising as container shipping costs have now fallen back to pre-pandemic levels, so it is likely that respondents are referring to post-Brexit regulation costs. Turning to the year ahead, similar trends play out, with increasing energy costs (32%) leading the way – despite those costs having peaked – followed by costs in materials (25%), the availability of materials (20%) and access to labour (18%).

AI
Sustainability

How can manufacturers deal with price increases in an inflationary market?

Download the report

Against the odds: The future of UK manufacturing

Get in touch with our experts

Justin Matthews

Justin Matthews

Justin Matthews

  • Partner
  • Financial Advisory
  • London
Jonathan Dunn

Jonathan Dunn

Jonathan Dunn

  • Partner
  • Restructuring Advisory
  • Bristol
Martyn Pullin

Martyn Pullin

Martyn Pullin

  • Partner
  • Restructuring Advisory
  • Teesside
Luke Wilson

Luke Wilson

Luke Wilson

  • Partner
  • Restructuring Advisory
  • London