Stephen Phipson, CEO of Make UK, reflects on how the manufacturing sector has fared during the pandemic and looks at what research suggests is set to be a positive few months ahead for the industry.
As we enter the second half of the year, it’s a good time to take stock and look at how far manufacturing has come over the past tumultuous fifteen months. Having been one of the very few sectors of the economy that has kept going to a very large extent all the way through the crisis, the second quarter of 2020 nonetheless saw manufacturing take a massive hit to output, in particular as major sectors such as automotive and aerospace literally shut down overnight.
Every quarter Make UK publishes its Manufacturing Outlook survey, which has a track record going back over 30 years and provides valuable historical comparisons; how are we doing now on the back of the Covid crisis compared to after the financial crisis, for example, and other previous reactionary shocks. They also cover not just one indicator of activity but also others, such as investment and recruitment intentions and the impact on prices both domestically and for export orders. During the second quarter of last year, the indicators reached negative levels worse than those recorded during the depths of the financial crisis showing just how hard the sector was hit in such a short space of time. Since then, however, manufacturing has recovered and Make UK’s latest Q2 survey twelve months on provides welcome positive news after a year of gloomy indicators showing that the sector is well on the road to recovering much of the lost output from the pandemic.
All the indicators are in positive territory, with forward-looking indicators for the next three months showing continued optimism. Most significantly, Make UK has doubled its growth forecast for this year to almost 8%, faster than the economy overall. This indicates that all being well, so long as the vaccination programme continues, the sector is on track to recover much of the 10% fall in output that it lost over the last year. That is not to say there aren’t major challenges ahead, but the picture looking forward is far more positive than it was this time last year.
One of the results of the pandemic, for good or bad, is that manufacturing has been catapulted to the centre of the economy. Having for decades been viewed in many circles as non-essential for growth and jobs, with a view that we could get by on services alone, the crisis has shown that we have had an over-dependence on the service sector. By contrast, industry has proven just how agile and innovative it can be in coming to the country’s aid at a time of crisis. Many companies pivoted very quickly to produce medical supplies, while others kept running, including the energy sector which kept the lights on and the food and drink sector, the biggest manufacturing sector accounting for some 15% of output, which kept the country supplied with essentials.
This innovation will be critical to the success of the sector moving forward as the adoption of digital technologies takes hold at an ever-faster pace. As with the history of previous pandemics, one of the outcomes has been to catapult forward the acceleration of technologies. We have seen companies adopt technologies in five months that might have taken five years previously. As society tackles the key challenges such as climate change, clean transport, and an ageing population, this innovation will be crucial to ensuring that industry is seen as a solution.