Manufacturers start 2017 “facing more risks than opportunities” says EEF

The UK’s manufacturers are starting the new year facing yet more uncertainty and unpredictability, according to the latest findings from the EEF.

The organisation’s annual Executive Survey has revealed that some 46 percent of firms believe that 2017 will bring more risks than opportunities, however, it also highlighted that firms are planning to face these challenges head-on.

UK manufacturing is striding into the new year with firms focused on delivering ambitious growth plans and feeling positive about productivity, employment, investment and sales, the survey found.

Manufacturers are realistic about the challenges ahead, but appear to be quietly confident about conditions in their industry. In terms of broader conditions, however, only a quarter of firms (25 percent) expect UK economic conditions to improve, outpaced by those steeling themselves for a decline (47 percent).

The view is similar when it comes to global economic conditions too, where 24 percent anticipate improvement and 36 percent predict deterioration during 2017.

Positive outlook within sector

This more pessimistic outlook does not taint manufacturers' views of their own future performance though, with many still expecting to pack a punch. In the year ahead, 56 percent of firms expect to increase their productivity, while half expect to boost UK sales.

Their priorities and direction of travel is very clear – 56 percent intend to increase productivity through process innovations, while half aim to increase investment in technology and innovation. As well as looking towards 4IR (the 4th industrial revolution) over four in ten (44 percent) will be working with suppliers and customers to ensure supply chain flexibility.

There is good news on the export front, too, where over four in ten firms expect to see improvements in volumes – 43 percent in non-EU and 41 percent in EU exports. Permanent employees and investment levels also look set to be stepping in the right direction this year.

Aware of challenges ahead

That is not to say, however, that manufacturers expect an easy ride with these developments - the findings suggest that they remain fully aware of the challenges they face in trying to deliver on their goals.

Brexit also looms high on their risk radar - it is seen as a significant exacerbating factor in a number of key areas, such as exchange rate movements (74%), rising input costs (66%) and volatility in major markets (45%). Companies also recognise potential impacts from Brexit to the perception of UK sourcing.

But, while Brexit has amplified risks, it has not tarnished manufacturers' views on the UK as a manufacturing base. Over six in ten firms (61 percent) say that the UK is a competitive location for their manufacturing activities - up from 56 percent last year.

2017 set to be another “bumpy ride”

"Global political upheaval means that 2017 looks set to be another bumpy ride, with manufacturers forced to navigate uncertainty, unpredictable economic conditions and a number of risks that have been amplified by Brexit,” commented Terry Scuoler, CEO of EEF.

"Against this backdrop a smooth journey is far from guaranteed, but firms are strongly attuned to the challenges and remain fully focused and determined to deliver on their long-term plans for growth. With a new digitally-driven industrial era on the horizon and everything to play for, this long-term vision and focus is vital - despite the peaks and troughs manufacturers cannot afford to be diverted away from where they need to be,” he continued.  

"In many ways 2017 is likely to be another unprecedented year of change and uncertainty, but the UK manufacturing sector remains ambitious, resilient and adaptable. These strengths coupled with firms' sophisticated and dynamic business strategies should help keep our sector on course and I would urge the Government to play its part too by ensuring that it implements a strong, robust and comprehensive industrial strategy to support UK manufacturing's drive for growth and technological innovation."    

Brexit risks and opportunities will be amongst a number of issues up for debate on 22nd February at EEF’s National Manufacturing Conference.