Blog: Make UK – West Midlands Manufacturing Economic Briefing

A sobering economic briefing from Make UK on 15th July reflected on the challenges facing the manufacturing economy in the UK as a whole, and the manufacturing sector in the West Midlands in particular. Fhaheen Khan, economist at Make UK reported on their Q2 manufacturing outlook survey, which showed that:

  • Output fell to the lowest on record
  • Both UK and Export orders declined to levels comparable to the financial crisis
  • UK and Export margins have also declined significantly
  • Redundancies are increasing and firms are holding back on investment plans
  • Manufacturing output forecast for 2020 at -10% and at 5.8% growth for 2021

Fhaheen moved on to show how the West Midlands has had one of the largest declines in business confidence compared to other UK regions since this time last year. With 304,000 jobs in manufacturing (10% of the region’s total workforce) and the EU accounting for 44% of exports, the uncertainties around Brexit were already having an impact before the pandemic. Fhaheen showed how both output and total orders in the region performed worse than the UK average for the final quarters of 2019, with the average performance of both domestic and export orders significantly worse than last year, and investment intentions significantly below the UK average.

With over 40% of firms in the West Midlands expecting that it will take more than 12 months to return to normal trading conditions, a poll of the 56 participants in the briefing showed that 83% didn’t think the measures recently announced by the Chancellor would help.

An interesting Q&A session included thoughts on the dangers of so much of the government’s Covid response being loan based, particularly in a time of reduced demand when firms may struggle to generate enough revenue to service the debt incurred. The chicken and egg situation companies find themselves in when having to prove they are a ‘going concern’ to get necessary financial support when the reason they need the finance is to make sure they are a going concern was also discussed. Many felt that putting more funding through UKRI made it too much of a challenge for SMEs in particular to access, whereas increased investment allowances to increase sustainability, productivity and digitisation could be really helpful to the manufacturing economy in the region.

The whole presentation can be seen here.

(Author: Jane Holmes, Innovation Alliance for the West Midlands)