As UK growth first started to gather momentum following the recession, the manufacturing sector became one of the country’s best performing areas, feeding demand for industrial property.
However, recent weakening in global demand has seen both confidence and output within the sector take a nose dive, with many manufacturing firms now expressing a belief that growth will slow considerably as 2014 draws to a close.
According to the latest data from accountancy group BDO, the manufacturing index fell from a reading of 113.2 in August to 111.6 in September, marking the steepest monthly fall in optimism since May 2013.
Although any reading over 100 indicates that growth is still very much on the cards, industry experts are concerned that the sharp plunge will continue into the coming months – something which could take a heavy toll on both manufacturers and the wider UK economy.
BDO partner Peter Hemington believes that the global conditions currently faced by manufacturers could have a significant impact upon the UK’s manufacturing industry should the situation not improve soon.
He says; “With global conditions becoming increasingly challenging, it was only a matter of time before the stellar increases in economic growth recorded earlier this year came to an end.
“Given their reliance on exports, manufacturers have borne the brunt of weakening global demand but the effects of stuttering worldwide growth are obvious throughout the economy.”
Unfortunately, it seems that the manufacturing industry is not the only area of the UK economy to be affected. BDO also found that output across all areas dropped somewhat, with a fall from 103.8 in August to 103.3 in September bringing the index of all businesses’ growth expectations worryingly close to the 100 mark which would indicate a return to contraction.
While this reading is certainly better than the 99.5 output index recorded at the end of September last year, the consistent steep drops in both confidence and output amongst manufacturers could signal a further period of economic downturn for the UK.
Fortunately, though, neither output or optimism growth slowdown seem to have had an adverse effect upon hiring patterns, as BDO’s employment index climbed from 111.2 in August to a post-recession high of 112.3 in September.
BDO’s research backs up data from the purchasing managers’ index (PMI) for UK manufacturing, which plummeted to a 17 month low of 51.6 in September. Again, the reading remains slightly above the 50 marker between growth and contraction, but on top of the ONS’s announcement that industrial output fell flat in August it is causing a degree of concern amongst investors and board members nationwide.
Given these figures it must simply be hoped that most firms will be able to hang on until conditions improve and that the lead up to Christmas will encourage consumers to begin spending in earnest. Otherwise, the end of 2014 could mark the beginning of a new period of austerity for the UK.
