Britain’s largest manufacturers believe the UK is increasing its competitiveness as a global hub for manufacturing, despite high energy costs, worker shortages and political instability holding back progress.
In a crunch period for the economy before the general election, the manufacturing trade body Make UK and the accountancy firm PricewaterhouseCoopers said industry bosses were growing more confident about the sector’s prospects, but “headwinds of sustained economic challenges” still remained.
Publishing the findings of a survey of more than 200 senior manufacturing executives, Make UK said a majority believed Britain was becoming a more competitive place to locate industrial production than 12 months ago.
Almost a third said the UK was increasing its competitiveness against Germany and France, while more than a quarter believed Britain was moving ahead of Spain and Italy. However, a larger share of companies said the UK was losing ground against the US, China and India.
The findings come after a period of heightened instability through the Covid pandemic, Brexit and the shock from soaring energy prices after Russia’s invasion of Ukraine, with industry bosses hopeful that 2024 will be steadier amid easing inflation and the prospect of Bank of England interest rate cuts.
Stephen Phipson, the chief executive of Make UK, said: “We are now seeing some hope that conditions may be improving, amid a more supportive and stable policy environment, but this must be cemented within a long-term industrial strategy.”
While manufacturing output in the UK has been shrinking for 17 consecutive months amid the impact from higher borrowing costs and weaker consumer demand, activity has fallen deeper in several EU countries, including Germany, where the economy is in recession.
UK firms had welcomed measures in Jeremy Hunt’s autumn statement to offer permanent investment reliefs, saying the tax breaks could encourage investment in Britain. However, bosses have also roundly criticised ministers for the lack of an industrial strategy after years of flip-flopping on policy – including Rishi Sunak watering down the UK’s net zero promises last year.
Businesses have also warned that Brexit is damaging the competitiveness of the British economy, with a survey of more than 700 UK exporters by the British Chambers of Commerce last month showing that almost two-thirds found selling to the EU – the country’s largest export market – had become harder in the past year.
The Make UK findings come as separate research from the accountancy firm Deloitte found optimism was rising among the chief financial officers (CFOs) of the UK’s largest companies.
According to its latest quarterly CFO survey, which is monitored by the Bank of England for early warning signs from the economy, a net 11% of finance leaders were more optimistic about the prospects for their business than three months earlier – significantly above average levels.
Ian Stewart, Deloitte’s chief economist, said: “These findings may seem at odds with recent economic news, particularly a contraction in third-quarter GDP and forecasts of sluggish UK growth in 2024.
“But, while the pace of growth softened in 2023, activity proved more resilient than expected, with unemployment at low levels, corporate profitability holding up and an absence of stress in financial markets. Crucially, inflation has fallen sharply since the summer, bolstering expectations of earlier interest rate reductions.”
