2022 is a year to look forward to for manufacturers
After a turbulent last two years, the manufacturers organisation Make UK believe that 2022 will be a positive year for manufacturing in the UK, with optimism high among sector executives.
The last couple of years have been a rollercoaster for manufacturers which have seen output plunge to record lows as the pandemic swept in and then a rubber band effect in 2021 as the rebound brought output to record highs. Throughout all of this manufacturing has remained open, showing remarkable resilience and in many cases re-purposing to produce medical equipment, whilst keeping the economy moving, the lights on and food on the table.
At the start of each year Make UK publishes a survey of the views of Senior Manufacturing Executives of the year ahead. The survey covers a broad range of topics on both the opportunities and risks that companies see, as well as their views on the hot political issues.
The good news from the 2022 survey is that manufacturers are much more optimistic about their prospects having weathered the storm of the last couple of years, with almost three quarters of companies now believing conditions for the sector will improve in 2022. A similar number also believe the opportunities for their business outweigh the prospects for both the UK and global economies while two thirds also believe the opportunities for their business outweigh the risks, especially as, to date, the sector appears to have seen little or no disruption from the latest Omicron variant to alter this confidence.
Most notably, almost two thirds of companies felt the UK to be a competitive location for manufacturing with just 13 per cent believing it to be an uncompetitive place to do business.
To take advantage of these opportunities manufacturers are prioritising improving productivity, investment in their people as well as new product development, while the recent COP 26 summit appears to have accelerated investments in the drive to 'net zero'. The more positive outlook for growth is reflected across all major markets with 40 per cent of companies forecasting growth in exports to the United States, closely followed by the EU. Around a quarter are looking for growth in Asia and around one in five to the Middle East.
However, the EU market is set to see the biggest decrease in exports by 10 per cent of companies while, one year on from leaving the EU, two thirds of companies said that leaving had moderately or significantly hampered their business, with over a half of companies fearing a further impact this year from customs delays due to import checks and changes in product labelling.
Not surprisingly, the biggest risks to companies remains access to skills and talent with many companies having to pay an additional premium on salaries to attract people and, even then, are being outbid. However, on a positive note the survey shows that, despite the pressures companies are under, almost half plan to invest in apprenticeships in the next year.
The second biggest risk is input costs which show no sign of abating. While some of these are global such as increased shipping and energy costs, some are self-imposed such as the forthcoming increases in Corporation Tax and National Insurance, both of which are ill-timed as far as manufacturers are concerned. This is creating the perfect storm for companies with inflationary pressures realistically running at around ten per cent. Price rises are now being built in for many companies as a result.
Overall, however, the survey shows that for those companies that are remaining agile, innovative and adaptable the upcoming year will see a far more positive outlook after the turbulence of the last couple of years. In particular, the rapid acceleration of digital technologies such as artificial intelligence and augmented reality, as well as the use of data, is bringing increased improvements in processes, productivity and new products which are producing a step change in the performance of the sector.
