England Great Britain: The British Industry has not kept pace with the economy
The British economy is buzzing: According to the Economist Intelligence Unit the BIP in 2015 should rise by 2.3 %. The Engineering Employers' Federation (EEF) even expects 2.6 %. However, the manufacturing industry is not in very good shape, according to the latest figures the EEF has lowered its prediction.
For this year the EEF sees a growth of 1.5 % in the manufacturing industry. Even though companies had expected a strong activity during the course of the year 2015, the results of the second quarter emphasized the weak trend in the branch for the first half of 2015. The incoming orders primarily dropped in the last quarter. The sector is still in a positive terrain but it shows a steady reduction in key indicators, mainly in the domestic demand and the domestic investment plans.
Particularly the weaker activity in the oil and gas sector burdened the upstream industries. Postponed investment plans put the domestic orders under pressure. At the same time the decline in the investment expectations can lower the investment growth to the lowest level since 2012. “The manufacturing industry is growing further but not at the rate that we expected at the beginning of the year”, says Lee Hopley, chief economist of the EEF.
British machine building sector is feeling the weakness of the industry
Even the machine building sector is feeling the weakness of the industry In the first quarter of 2015 the incoming orders were below the prior-year level, reports the Engineering and Machinery Alliance (EAMA) in their Business Monitor. On the other hand the figures for jobs and investments have remained strong. “The results are mixed. Companies in the UK seem to be gaining less than in the last year and the same signals can be seen on the export side”, says EAMA chairman Martin Walder.
A reason for the significantly low export expectations (index level-1 in the first quarter of this year after +23 in the quarter in the previous year) could be his view on the strength of the British Pound. However the foreign orders will look a lot better (currently +10 after +15 in the first quarter 2015).
On the other hand the companies will continue to create jobs and invest like in the last three years. “If we include all kinds of investments and the training of employees as well as capital investments, we see that the share of the investing companies has risen from 45 % in the first quarter of 2013 to 55 % in the previous year's first quarter and 65 % in the first quarter of the this year”, explains Walder. The machine building companies in the UK seem to be investing in the skills of their employees, in research and development as well as in other intangible assets to improve their competitiveness.
The machine tool industry is worried about its future
In the long term this branch of industry is worried about its sustainable future. “The politicians understand that we have to bring a new balance to the economy. And they encourage investments, innovations, exports as well as productivity and most importantly, the development of the knowledge base of our nation”, says Mark Ridgway, the outgoing president of The Manufacturing Tools Association (MTA). He warned: “If you want to tackle the trade deficit, you need a manufacturing industry. If you want to strike a new balance in the economy regionally you need a manufacturing industry. If you want a strong science and technological base, you need a manufacturing industry.” The message is simple for Ridgway. Everything is based on a manufacturing industry.