On January 10 2018, the Office of National Statistics reported a boom in the manufacturing Industry, attaining its highest output since February 2008. Moreover, after recording a seventh consecutive month of growth in November 2017, it is enjoying its fastest rate of expansion within the same period under consideration.
According to EEF, UK manufacturing currently –
accounts for 45% of total exports
contributes 10% of GVA
employs 2.7 million people
provides 14% of business investment
represents 68% of business research and development (R&D)
That is not all, for if the comments by Lee Hopley, chief economist at manufacturers’ organisation EEF are anything to go by, further growth is expected. She said – “Manufacturers’ expectations for the year ahead point to output and export growth being maintained through this year on the back of continuing support from a burgeoning global economy. This, together with an ongoing commitment from government to deliver on its industrial strategy, will be crucial in helping to propel the sector forward.” Good times seem to be ahead.
However, what changed? What are the reason for the boom experienced by the manufacturing sector in the last 10 years?
Two factors have contributed to this; they have been the main drivers –
The boom in global growth is helping to drag along the UK manufacturing sector. With the Financial crisis behind us, the three powerhouses of global growth – the USA, China and Europe – performing strongly at the same time, customers doing well and technology demands are ever increasing, export has increased.
That has led to car exports, for instance, rising rapidly and manufacturers in the flow control industry such as Hopkinsons have experienced strong growth. This is helped by the production of partly finished goods bought by other firms to piece together finished products.
The rise in new orders has led to more exportation in the manufacturing sector while also leading to job creation. The exportation particularly has resulted in a closing of the trade deficit between UK and the rest of the world.
From this seemingly position of weakness has come an advantage. Following the Brexit referendum, there has been a fall in the value of the sterling. This has made UK exports more competitive and as a result has driven up the demand from the UK. With the pound weaker, export has boomed as overseas countries find the currency value more favourable. Companies have seen rising export requests from the US, Europe and the Middle East.
Another way the fall of the value of the pound is that it ironically increases the value of foreign earnings. A fall in pound means an increase in value of other currencies, so all exports and foreign investments will yield more dividends and profit.
A weaker pound increases local demand for domestic products as well. With the cost of importations increased, consumers are more inclined to buy UK manufactured goods. This is also a boost for small manufacturers.
There is every reason for the wave of optimism spreading in the UK manufacturing sector. Output has been on a steady upward climb for 10 years and the forecasts and importantly, factors for the increase, only further spell success for the sector.