Factory sector trends

(last updated July 2019)

What has been happening in manufacturing

Although the fortunes of individual sectors have varied in recent years, in general terms the manufacturing sector has seen the following developments:

  • increasing competition from overseas manufacturers, particularly in sectors such as clothing and footwear
  • the continuing decline of traditional 'heavy' industries
  • rapid growth of high tech electronic industries
  • the emergence of manufacturer/customer alliances and partnerships
  • increased regulation of many sectors, for example the introduction of packaging waste and food safety regulations, and regulations introducing the collection/recycling of waste electronic and electrical equipment and waste batteries
  • energy costs increasing as a result of the introduction of the Climate Change Levy
  • an increase in demand for locally produced food and drink products
  • pressure on food manufacturers to reduce the level of fat, sugar and salt in food products - the Soft Drinks Industry Levy (known as the 'sugar tax') came into effect on 6 April 2018 and taxes drinks manufacturers according to the volume of sugar-sweetened drinks they produce or import
  • an increasing focus on environmental issues and measures that can reduce an organisation's carbon footprint
  • a greater awareness of ethical issues - for example the launch and growth of the Fairtrade initiative
  • rising costs and falling demand during the global economic downturn of the late 2000s and early 2010s and following the Brexit vote in 2016 which led to a fall in the value of pound, rising inflation and pressure on consumer spending
  • the introduction during the early 2010s of regulations covering the storage and transport of waste
  • indications that manufacturers are choosing to bring operations back to the UK ('re-shoring') following a lengthy period during which cheaper labour costs overseas proved attractive
  • increasing use of industrial robots throughout the manufacturing sectors

During the mid 2010s the manufacturing sector began to recover from the long-running economic downturn. However, the upturn barely got going before it suffered setbacks due to:

  • weak export markets, with global economic growth driven down by turmoil in developing markets and a weakening of the Chinese economy
  • the steel crisis caused by China dumping surplus steel production on the market when global demand for steel was weak
  • reduced public spending
  • a skills shortage and low productivity

Even before the vote in June 2016 to leave the EU these problems had led to a drop in manufacturing output by the end of 2015, with chemicals, mechanical engineering and steel production badly hit. In the lead up to the vote, industry was affected by uncertainty about the result, resulting in job losses and investment decisions being postponed so that manufacturing started 2016 in a position of near stagnation.

After the vote to leave the EU manufacturing activity contracted very quickly, with a fall in new orders and weak overseas demand. The fall in the value of the pound made exports more competitive and this boosted output for some manufacturers. However, the weak pound increased the price of imported components and raw materials. Manufacturing output remained lacklustre in 2017 and 2018 and is forecast to remain so for the foreseeable future.

Increased regulation has also made things difficult for the manufacturing sector, including the introduction of:

  • the sugar tax in Budget 2016 - this comes into effect in April 2018
  • the extension of the period of copyright protection for artistic works that have been industrially exploited (for example replica furniture)
  • the apprenticeship levy from April 2017
  • plain packaging for cigarettes

A lot of UK legislation comes from the EU, either as Regulations or as Directives incorporated into UK legislation. Until the UK has withdrawn from the EU, it remains a member and is bound by EU law. After the UK leaves the EU some of this legislation may be amended, repealed or replaced.

The manufacturing sector as a whole has suffered from a long term decline, with the number of people employed in manufacturing falling from around 7 million during the early 1990s to around 2.6 million by the mid 2010s.

You will have to decide:

  • whether there will be enough customers for your particular products
  • whether you will be able to produce them cheaply enough to price competitively and still make a profit
  • whether the market you hope to supply has reasonable prospects for the future
  • how you will keep customers loyal to your product ranges
  • whether your local economy is healthy enough if you plan to supply a local rather than national market

Keeping up to date with developments

The manufacturing sector is represented by many different trade associations, which may produce specialist journals of interest to those operating in that sector.

Organisations providing services to the manufacturing sector as a whole include the CBI, the Scottish Council for Development and Industry (SCDI), the Chartered Institute of Procurement and Supply (CIPS) and the British Standards Institute (BSI), among many others. The Welsh Government Business Wales initiative gives support and advice to manufacturing businesses in Wales.

If you plan to target export markets you can get help and guidance from UK Trade & Investment (UKTI). There is also information for first-time exporters on the Gov.uk website.

Trade shows

You will be able to obtain a lot of useful information if you go to a trade show or exhibition for your type of business. The Exhibitions website contains details of trade shows that may be of interest to you.

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