North East manufacturing sees a rebound in activity

North East manufacturers are seeing a rebound in activity in the first quarter of the year as the domestic and global markets have improved, easing fears of a significant recession for industry this year.

The findings in the Make UK/BDO Q1 Manufacturing Outlook survey show a marked pick up on the picture in the final quarter of 2022. The figures echo the gradual improvements in other data such as the UK and European PMIs which are now only just in negative territory, as well as a strong pick up in demand from China.

According to Make UK and BDO, this improvement in the North East in particular could be down to a strong pick up in the mechanical equipment sector where the North East has a significant presence, possibly due to manufacturers taking advantage of the last few months of the super-deduction tax scheme which ends this month.

Both output and orders picked up in the North East with the order balance of +28 per cent especially strong. This was driven primarily by UK orders (+57 per cent) which ties in with the strength of demand in mechanical equipment. On the back of this improving picture employers’ intentions to both recruit and invest also improved.

Looking forward manufacturers in the North East are more confident about prospects with output and orders predicted to increase further, reflected in further improving job prospects.

However, despite the improvement this quarter, Make UK is still cautioning against the worst of conditions being over and is still forecasting a contraction for manufacturing in 2023 as the substantial challenges the sector is facing show few signs of abating. (Spring Statement reflection).

Dawn Huntrod, North East region director at Make UK, said: “Manufacturers in the North East have seen a rebound at the start of the year as conditions have improved in their major markets and, business confidence has improved.

“However, one swallow doesn’t make a summer and it is far too early to say the worst has passed given the significant challenges the economy faces. However, the Budget should help boost investment in the short to medium term although ideally, full expensing should be made permanent to better reflect the investment cycle for manufacturers.”

Steve Talbot, head of manufacturing at BDO in the North East, added: “The region has started the year with some positive news, with both output and orders picking up and strong demand for mechanical equipment.

“However, UK manufacturers need ongoing certainty on a range of fronts, including long-term energy support, and assistance to attract a sustainable workforce. The recent government announcements do little to address the immediate threats to UK manufacturers resulting from high energy costs.”

In terms of overall output this year Make UK is forecasting a contraction of -3.3 per cent (a slight improvement from -4.4 per cent forecast at the end of last year) and growth of just 0.8 per cent in 2024.

By Mark Adair – Correspondent, Bdaily

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