MANUFACTURING SLOWDOWN

THE North East manufacturing sector is set to shrink this year but companies are seeing a rebound in activity, an industry group says.

The Manufacturing Outlook survey from Make UK and accountancy firm BDO shows a marked pick-up in early 2023 as compared to the final quarter of last year. The improving picture in the North East has been attributed to strong performance in the mechanical equipment sector and manufacturers possibly taking advantage of the last few months of the super-deduction tax scheme.

The survey found that both output and orders picked up in the North East, driven primarily by UK orders.

The improving picture is leading manufacturing firms to plan both recruitment and investment, and companies are more confident in future prospects than previously.

But Make UK is still cautioning against the worst of conditions being over and has forecast a contraction for manufacturing in 2023 as the challenges facing the sector show few signs of abating.

The organisation is forecasting a contraction of – 3.3% this year – a marginal improvement from the – 4.4% forecast at the end of last year – and growth of just 0.8% in 2024.

Dawn Huntrod, North East region director at Make UK, said: “Manufacturers in the North East have seen a rebound at the start of the year as conditions have improved in their major markets and, business confidence has improved.

“However, one swallow doesn’t make a summer and it is far too early to say the worst has passed given the significant challenges the economy faces. However, the Budget should help boost investment in the short to medium term although ideally, full expensing should be made permanent to better reflect the investment cycle for manufacturers.”

Steve Talbot, head of manufacturing at BDO in the North East, added: “The region has started the year with some positive news, with both output and orders picking up and strong demand for mechanical equipment.

“However, UK manufacturers need ongoing certainty on a range of fronts, including long-term energy support, and assistance to attract a sustainable workforce. The recent government announcements do little to address the immediate threats to UK manufacturers resulting from high energy costs.”

Last week, the NatWest North East PMI Business Activity Index – which measures change in the region’s manufacturing and service sectors – suggested that business activity in the North East stabilised in February, though it remained the weakest in the UK. Meanwhile, the region’s unemployment has reached a record low, according to figures released in the last seven days.