Manufacturing News

UK manufacturing outlook uncertain in 2012

The impact of problems in the eurozone could prove to be damaging for solid growth in the UK’s manufacturing sector this year.

According to a report released by UK manufacturers’ organisation EEF, 50 per cent of Britain’s manufacturing executives believe that the British economy will decline further this year as the country tries to deal with the fallout from the eurozone; Britain’s key trading partner.

The EEF surveyed 204 companies and found that a fifth of executives expected conditions in the UK economy in 2012 will be better than in 2011, while 49% believe conditions will worsen.

Key findings of the 2012 EEF Survey revealed that:

  • UK manufacturers were generally confident about exports, however weak domestic outlook are leading companies to consider untapped and markets further afield for growth in sales of products and services;
  • They were seeing opportunities in changing consumer requirements and diversifying into new supply chain strategies; and 
  • They cited the main risks to growth in 2012 are external. Raw materials shortages was the most comment concerns for all sectors.

UK manufacturers’ response

UK manufacturers are targeting non-traditional markets in response to changing consumer demand and are taking greater advantage of supply chain opportunities.

Manufacturers are focusing on generating continued growth in their own business through 2012  by increasing exports of products and services to emerging markets

Uncertainty in 2012

The Manufacturing Executive survey, published together with EEF’s 2012 Economic Prospects report, shows the outlook for the economy in the year ahead comes with a high degree of uncertainty.

The main challenges stem from the unresolved eurozone crisis and its potential negative impact this on access to finance and the ability of other markets to shake off the effects of recession.

This uncertainty is shared by manufacturers and has fed through to a deteriorating view of growth prospects for the economy as a whole. A fifth (21%) of executives expecting conditions the UK economy in 2012 to be better than in 2011, but half (49%) believe conditions will worsen.

EEF chief economist Lee Hopley said that while UK manufacturing has posted solid growth in the past few years, the environment has clearly become a lot more challenging for the sector in 2012.

“The road ahead for manufacturing and the UK is extremely uncertain but there still some grounds for optimism,” Hopley said.

“Manufacturing has proved to be agile and resilient through a bumpy recovery and companies are continuously looking for new sources of growth.

“Most manufacturers continue to grasp the opportunities in untapped markets for services and in faster growing emerging markets. Together with the diversification of supply chains, these factors are underpinning some confidence at firm level that sales will end 2012 higher.

However, Hopley notes that this year won’t pass without challenges.

“Uncertainty about the wider global economy, lingering problems with the supply of affordable to businesses and supply chain constraints and raw materials shortages could impact on production levels and confidence. If we can navigate these hurdles, manufacturing should again play a role in delivering the balanced growth our economy needs,” Hopley said.

Biggest risk to UK manufacturing in 2012

According to the survey, raw materials shortage is one of the biggest risks UK manufacturers will face in executing their growth plans in 2012.

Two-thirds of executives survey cited that they were concerned with growing pressure in supply chains and shortages or stretched lead times of some raw materials and how that could impact on production.

Two-fifths of companies surveyed noted that the situation in Europe and potential knock-on consequences for on the UK has lead to concerns over the provision of finance.

Overall the EEF report reveals that overall manufacturing sentiment has slipped since 2009, particularly among some larger manufacturers.

To keep manufacturing momentum on the up, the EEF argues that government reform is necessary to avoid long term challenges, not just for the manufacturing sector, but for the UK economy as a whole.

To access the EEF’s Manufacturing Executive survey and 2012 Economic Prospects report, click here.

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