Defence sector helping buck manufacturing’s downward trend, comments MHA expert
Manufacturers working in defence related industries are helping keep the region’s manufacturing sector on track and can be confident of investing for growth, according to a Lancashire-based manufacturing advisor.
Ginni Cooper, partner at Preston-based accountancy and advisory firm MHA, was commenting upon the release of the latest S&P Global UK Manufacturing PMI data for July.
The manufacturing PMI (purchasing manager’s index) is seen as a key barometer of confidence in the sector and rose to a six-month high of 48.0 in July, signalling a slight easing of the downturn the manufacturing industry has been experiencing.
However, market conditions remain weak overall and the index is still below the 50.0 threshold which indicates the sector is growing. Four out of the five PMI components – output, new orders, employment and stocks of purchases – remained at levels consistent with a deterioration in overall operating performance
Ginni, who advises manufacturing and engineering businesses across the region, said: “Although the incremental rise in today's manufacturing PMI data is, in theory, good news, more than anything, it is a further reflection of the continuing difficulties faced by the sector. PMI still remains below the 50 threshold, indicating a lack of confidence and optimism towards the future.
“Manufacturers are being hit with a double whammy. Customers are facing increased costs, therefore ordering less, and firms are now starting to feel the full impact of the rise in minimum wage and employers' National Insurance contributions, as it hits their profit and loss accounts.
“While the Industrial Strategy has provided a glimmer of hope to the sector, the fundamental challenges of investment and skills shortages still remain. According to our clients, next year is likely to be flat in terms of growth and confidence remains dampened, which is unlikely to lead to investment in skills and technology that the sector so desperately needs. More signposting of where businesses can go for support is also required.
“An exception to this otherwise difficult landscape is those businesses that supply to the defence sector. Developments around the world and commitments from the UK government on defence spending mean that firms can be confident in the future growth of the sector and thus invest and expand for the future.”