Deloitte launches “Made in the UK” manufacturing report

Jane Lodge and Professor David Bailey

Support for exporters, jobs and making sure that credit flows through to business remain the top priorities for the manufacturing sector and wider economy, according to a leading business commentator and Midlands academic.

Professor David Bailey, from Coventry University Business School, said these, along with growth in export markets, could help trigger a mini-renaissance in manufacturing. He also pointed to the fact that more needs to be done by government to support the manufacturing industry.

Professor Bailey was speaking at a dinner in Birmingham to launch Deloitte’s first “Made in the UK” survey, which examines the critical issues for UK manufacturers trading in the global marketplace.

The findings of the survey reveal that 94 per cent of respondents export at least some of their manufactured output, with more than a third (35 per cent) exporting more than half of their production. Most saw their biggest challenge as achieving the efficiency necessary to be able to compete internationally on price.

The survey also illustrates that the comparative weakness of sterling has not yet boosted exports as much as may have been anticipated with fewer than one in three manufacturers (30 per cent) saying their exports had increased over the past 12 months. However, 94 per cent said they expected export figures to either remain the same (39 per cent) or increase (55 per cent) over the next two years.

Professor Bailey, who also took part in a podcast as part of the “Made in the UK” report launch, said: “The results of the survey demonstrate how critical exports are to manufacturers in the UK and the Midlands, and also how important they are going forward for providing a stimulus to the economy.

“With nearly all those questioned engaging in exporting, it is hoped that via outward looking manufacturers the UK has a chance to export its way out of recession, if conditions allow.

“This is critical as the main stimulants to the economy so far – the monetary and fiscal stimulus, the manufacturing re-stocking and a degree of restored financial sector confidence – will only take us so far.

“Overall, those surveyed are optimistic as to export prospects, with more than half expecting exports to rise. This is a useful indication that sterling depreciation and export growth are still expected to be the biggest stimulus for the sector going forward.

“This reinforces my view that more should have been done to cushion the blow to the manufacturing sector during the downturn to keep the capacity in place, which will both secure jobs and ultimately provide the export platform needed for growth.”

Jane Lodge, Midlands manufacturing industry leader at Deloitte, said: “Despite market predictions that the low value of sterling would dramatically drive up UK exports, the results illustrate that this has not happened as yet. It is imperative that companies which export in the Midlands region are all set to increase production in readiness for the anticipated upturn as the EU and US pull out of recession, when demand will surely increase and the effect of the low value of sterling will drive our export market in overall terms.

“The Midlands has a higher percentage of manufacturers that export and as the finding of the survey suggest, an export-led recovery could be underway in the next two years.”

The survey also looked at UK manufacturers’ attitudes to emerging economies, finding that 35 per cent of manufacturers were outsourcing production to a lower cost country.

Ms Lodge said: “Our findings suggest that UK manufacturers have engaged more with Europe than they have with the US and Asia. This contrasts with the US manufacturing model which has seen a greater amount of outsourcing to China. The fact that the bulk of our production takes place at home is not a bad thing, given that the UK is the sixth largest exporter of goods and related services in the world and that this industry still makes up almost 20 per cent of UK GDP.”

According to the results of the survey, confidence appears to be returning to the sector with the overwhelming majority of surveyed manufacturers confirming their commitment to maintaining staff levels as well as a third stating that their banks had been very supportive. However, two thirds (66 per cent) believe that the manufacturing sector is unlikely to gain any ground over the services industry.

“Against this backdrop, it is disappointing to see that manufacturers are pessimistic about the industry’s contribution to the rebalancing of the UK economy,” added Ms Lodge.

“The Midlands manufacturing sector’s role in lifting the UK out of recession should not be underestimated; neither should our technical capabilities which are gaining ground on other jurisdictions particularly in the high tech and environmental technology areas.”

For a copy of the Deloitte “Made in the UK” report and to listen to Professor David Bailey’s podcast visit http://www.deloitte.co.uk/pointofview. To watch an interview with Professor Bailey and Jane Lodge visit http://www.youtube.com/watch?v=HZ2v4ru2hLE

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