UK manufacturing outlook improves as output and orders gain in Q2

The outlook for the UK's manufacturing sector as picked up after output and orders rose strongly in the second quarter, according to a survey from Make UK released on Monday.

The Manufacturers' Organisation is now pointing to industry growth of 1.2% this year, outperforming the wider UK economy which is forecast to expand by just 0.9%.

According to a survey of 320 companies carried out between 15 and 29 May, a net 9% reported increased output over the second quarter, up from +5% in the first quarter, marking 14 back-to-back quarters of positive balances. The balance is expected to jump to +30% in the third quarter.

"Manufacturers continue to expect widespread growth in the next quarter which, though it will be difficult to fully realise, indicates that the upward trend is likely to continue into the third quarter," the Manufacturing Outlook report stated.

The total orders balance rose to 14% from 7%, with export orders (+10%) exceeding UK orders (+2%). The orders balance is forecast to surge to 32% over the coming quarter.

Make UK also reported that the "scramble to attract and retain talent also shows no signs of abating". Recruitment intentions rose to +26% from +8%, as companies prepare for an expected increase in demand and improving macro conditions.

Business confidence, ranked out of 10, increased to 6.9 from 6.7 the previous quarter, remaining above the 5.0 neutral level for the 16th straight quarter and equal to the highest level recorded since the survey started measuring the indicator in 2014.

The highest levels of confidence were seen in the North West (7.7) and London and the South East (7.4), while Scotland was the least confident (5.9).

“At long last, manufacturers can see concrete signs of growth and a much better economic outlook ahead," said Make UK's senior economist James Brougham.

"With prices cooling and, potential cuts in interest rates to come, the next government must capitalise on this scenario by delivering a modern, long term industrial strategy which goes beyond the 2030s and has cross government support. This must be supported by a revolution in skills, a shortage of which is the biggest factor affecting not just companies’ growth prospects but, in many cases, their ability to maintain daily operations and fulfil contracts."