The South West manufacturing industry is expected to recover by the end of 2022 provided supply chain disruption and worker shortages don’t throw a spanner in the works, a new report says.
The region’s factories are seeing strong growth prospects as economies continue to open up and the economic recovery strengthens, according to an major survey by manufacturers’ organisation Make UK and business advisory firm BDO.
Having seen a “brutal” 10% decline in output in 2020, the sector in the UK overall is now set to recover a significant amount of that loss in 2021, with forecasts suggesting it will have recovered the total loss from last year by the end of 2022.
But Make UK warned that supply chain disruption and some labour shortages could hamper this improving picture in the final quarter of the year.
The slow recovery in the aviation and aerospace sectors where the South West has a high exposure could also have an impact for some time.
In particular, both UK orders and total orders were very strong for South West companies with the total order balance of +33% very strong by historical standards. While output fell slightly, the business confidence indicator remains strong pointing to continued growth for the immediate future.
As a result of the robust growth prospects and increased business confidence, investment intentions have also increased substantially to a balance of +50%, the second highest of any UK region, while companies stepped up recruitment to meet demand.
Make UK is now forecasting growth for the sector of +7.1% in 2021, tailing off slightly to +4.4% in 2022. However, should these be met it will ensure the sector has recovered all the lost output from 2020.
Jim Davison, region director for Make UK in the South West, said: “South West companies are seeing buoyant growth conditions as prospects continue to accelerate for manufacturers with economies at home and abroad continuing to open up. However, the slow recovery of the aviation sector, supply chain shortages and the rapidly escalating increase in shipping costs are threatening to put roadblocks on the road to faster growth despite the current optimism.”
Matthew Sewell, head of manufacturing for BDO in the South West, said: “The substantially-improved levels of investment are a very positive sign and indicative of an industry that is confident of a future worth investing in. Manufacturers have proved their resilience over and over again, but we know big challenges remain. Increasing costs, rising inflation and the ongoing battle to attract and retain skilled workers locally despite the positive recruitment intentions will continue to stress-test South West manufacturers for the remainder of the year.”
