Britain’s largest manufacturers anticipate a substantial increase in orders and output in the second half of the year despite facing a chronic shortage of skilled workers that threatens the operations of some firms.
This positive outlook emerges as the manufacturing sector stabilizes from the erratic demand fluctuations caused by the pandemic, price disruptions following Russia’s invasion of Ukraine, and supply chain challenges due to blockages and conflicts such as those around the Suez Canal. These findings are based on a survey of 320 companies conducted by the trade body Make UK.
The survey revealed that the proportion of manufacturing businesses witnessing an improvement in their order books has doubled in the past three months. This growth has been largely driven by exports, especially strong demand from the US, which has compensated for weaker domestic conditions.
Additionally, cooling prices and the potential for interest rate cuts have bolstered expectations for a more robust growth in the latter half of the year, with business confidence reaching its highest level in a decade.
Make UK anticipates that manufacturing will grow by 1.2% in 2024, outpacing the projected GDP growth of 0.9% for the year. However, this optimism is tempered by a critical shortage of skilled workers, which manufacturers argue should be a central focus of the next government’s industrial strategy.
Companies stress that addressing this skills gap is essential for maintaining daily operations and fulfilling contracts, as well as for future growth prospects.
Both Labour and the Conservative parties have proposed measures in their election manifestos to tackle this skills shortage, although Make UK considers these measures partial solutions to what it describes as a decade of mismanagement of the apprenticeship system.
Prime Minister Rishi Sunak has pledged to shut down underperforming university courses to fund 100,000 apprenticeship places over the next five years. Labour, on the other hand, has proposed allowing employers to spend up to 50% of their apprenticeship levy on accredited non-apprenticeship training under a new growth and skills levy, providing them with greater flexibility in their spending.
James Brougham, a senior economist at Make UK, highlighted the necessity for the next government to leverage the current positive economic outlook by implementing a modern, long-term industrial strategy that extends beyond the 2030s and enjoys cross-government support.
He emphasized that this strategy must include a revolutionary approach to addressing the skills shortage, which he identified as the most significant factor affecting not only growth prospects but also the ability of many companies to maintain their daily operations and meet contractual obligations.
