Manufacturers aren't confident about the year ahead

The incoming living wage is making a fifth of firms plan for job losses.

by Rebecca Smith
Last Updated: 22 Feb 2016

Many were glad to see the back of 2015 – not least the manufacturing sector which said in December it expected manufacturing output for the year to fall 0.1%. The outlook for 2016 doesn't look much better as the annual EEF/Aldermore survey suggests many firms are bracing themselves for a tough year ahead.

Many cited ongoing global economic volatility as a significant concern – 40% feel the economy will continue to deterioriate this year - while almost twice as many manufacturers said their business faces more risks than opportunities in the year ahead (44% to 23%). 

It’s evident many are thinking of more difficult decisions as rising business costs, particularly regarding employment, are causing many to view the year ahead with trepidation rather than anticipation. The apprenticeship levy, auto-enrolment into pensions schemes and of course the government’s much discussed national living wage are all concerns potentially weighing heavily on the minds of manufacturers.

Though the EEF has said many manufacturers already pay above the £7.20 hourly rate for over-25s, which comes into force in April, 19% of those surveyed thought the policy would cause restructurings or indeed reductions in workforce.

It’s the latest in a series of glum updates from the sector – steelmakers and machinery manufacturers in particular, have struggled with the commodities price slump and China's slowdown. It's not surprising then that the number of firms regarding the UK as a competitive location dropped from 70% at the beginning of 2015 to 56% now.

Terry Scuoler, the chief executive of the industry body EEF, said, ‘The gloom that took the shine off UK manufacturing’s performance in 2015 is set to contiune into 2016. But, while expecting similar challenges as those seen last year, manufacturers are still planning for growth.’

There was some positivity when it came to matters closer to home as a third felt an improvement in industry and UK economic conditions were on the horizon. Half of manufacturers (55%) expect to increase productivity and more than four in ten anticipate a boost in UK and export sales. 

Still, it's clear the sector wants more action from the government. Writing for This is Money, Scuoler said what industry wants to see 'more than anything is a little more decisiveness in government'. As uncertainty continues to hold back manufacturers, it's hardly surprising that at the top of their 2016 wish list is a little assurance from politicians. 

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