13 April 2017

UK manufacturing sector reports strong export growth

The UK manufacturing sector is reporting solid growth, with increases in domestic and export sales since the previous quarter, according to the British Chamber of Commerce (BCC).

It’s Quarterly Economic Survey, which is based on responses from more than 7,300 businesses (manufacturing and services sector) in Q1 of 2017, shows the manufacturing sector performing strongly, particularly in the exports market.

The balance for manufacturing sector firms reporting increased domestic sales rose from +15% to +20%, and orders rose from +7% to +16%. Meanwhile, the balance of firms reporting improved export sales rose from +16% to +26%, and the balance of export orders also increased from +13% to +22%.

However, the BCC warned that the rising cost of overheads and raw materials are presenting as a risk to growth in the medium term. More than three quarters (76%) of manufacturers reported an increase in the price of raw materials (up from 65%), and 38% of manufacturers reported an increase in the cost of other overheads (up from 23%).

In addition, the percentage balance of manufacturing firms expecting the price of their goods to increase over the next three months remains at historic highs, despite falling slightly from last quarter from +52% to +47%.

Other findings show the percentage of manufacturers trying to recruit grew in the last quarter – standing at 86%. However, the sector also continued to experience high levels of recruitment difficulties - standing at 74%

But, confidence remained steady in Q1. The balance of manufacturers confident that turnover would improve over the next 12 months rose from +43% to +44%, and the balance of manufacturing firms confident that profitability would increase rose from +22% to +32%.

Dr Adam Marshall, director general of the BCC, said: “In the here and now, many businesses are resilient and experiencing solid growth. Many firms tell us their short-term expectations are strong, but that the medium-term picture is far from clear.

“While manufacturers have enjoyed a good quarter, they are facing higher costs at the factory gates, which increasingly translates into companies having to raise their own prices. With inflation already above the Bank of England’s target, this squeeze on firms looks set to continue in the medium term."

He continued: “Businesses also continue to report recruitment difficulties, and while we’d like to see greater investment in training across the board, without access to a sufficient talent pool, companies are restricted in their development ambitions.”

Adam Offord

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