Home Open Access News Finance Why the manufacturing sector could mitigate the looming recession

African-American man working in a manufacturing facility specializing in metal fabrication. He is wearing safety glasses and a reflective vest, holding a digital tablet as he inspects a large metal object. — Image: © kali9 | iStock

Why the manufacturing sector could mitigate the looming recession

May 2, 2023

The UK’s forthcoming recession is expected to be deeper than originally forecast; could the manufacturing sector save the nation from a complete recession?

The EY ITEM Club forecast warns that a 0.7% contraction in UK GDP is now expected for 2023, and inflation is at the highest levels seen in four decades. We’re looking for ways to boost GDP and pull ourselves out of the financial mire; could the UK’s manufacturing sector help?

Here, custom cable assembly manufacturer GTK offers insight into the importance of the UK manufacturing industry in 2023 and beyond.

Positive movements in the manufacturing sector

Right now, there are some positive movements in the manufacturing sector.

In recent months, the CPI has called on the UK government to prioritise funding for the industry with the knowledge that it could be key to unlocking economic success in the UK.

In January, the innovation centre announced that it would share £27.6 million of funding from the UK Research and Innovation’s Faraday Battery Challenge to develop and scale up battery technologies. This will help secure the future of electric vehicles and enable UK competitiveness within this field.

What’s more, the government has announced funding to support energy-intensive manufacturing businesses to help them mitigate energy costs. Steel and metal manufacturing is included in this, which is good news as these two sectors are integral to the wider manufacturing sector.

Various sectors, including manufacturing, performed better than expected at the end of last year, preventing the UK economy from falling into a recession during 2022.

Impact on global supply chains

Rising costs and lengthy lead times for both parts and finished goods have been a concern since Brexit was first tabled, as the new rules restricted imports and exports to and from EU countries.

The impact of COVID-19 has only compounded these issues. A Barclays report found that the manufacturing sectors most impacted by materials shortages include:

Steel and metal
Food and drink
Plastics
Electronics

John Morath, Managing Director at GTK, comments: “Over three years on from the UK’s formal withdrawal from the EU and the first COVID-19 lockdown, global supply chains continue to be impacted, and many manufacturers are still struggling to source parts.

“We knew how important it would be to mitigate these shortages in one of the most heavily impacted manufacturing sectors, so we built up our Core Material Strategy. With this, we stock high volumes of in-demand parts to reduce lead times and ensure our customers aren’t impacted by these shortages.”

Despite the continued impact of Brexit and COVID-19, Make UK’s annual industry analysis found that the UK remains the ninth largest manufacturing country globally, with a yearly output of £183 billion. Over 50% of the sector’s total exports are goods manufactured in the UK. These figures highlight the importance of manufacturing for the UK economy.

The industry must remain agile in its understanding of supply and demand, allowing for the efficient provision of products. The importance of providing great-quality products quickly, especially with the global supply chain issues sparked in the last two years, cannot be understated.

This agility and responsiveness are particularly essential as demand rises again in 2023, especially in electronics manufacturing.

The domestic and global markets have seen increased activity for manufacturers in the first quarter of 2023, largely driven by this increased demand. With this upward trajectory, we can look to a healthy output for UK manufacturing this year, highlighting how it can support the economy during difficult financial times.

A flag merging the UK and EU flags, by Houses of Parliament building in London — Image: © MarioGuti | iStock

The manufacturing sector is vital for employment opportunities

The manufacturing industry is also important in terms of job creation and security. Make UK’s survey found that the sector created 2.5 million jobs in 2022 and that the wages for those jobs averaged 12% higher than the whole economy.

With concerns surrounding job security and longevity rising during the pandemic, manufacturing offers millions of job opportunities. However, the industry is an ageing one, with a lot of the technical knowledge held by employees over 55, many of whom left the workforce during COVID-19. This has left a pressing skills gap, and the sector must focus on attracting a new generation of workers to it – and upskilling them efficiently.

Manufacturing is also a male-dominated industry. The new workforce generation, particularly young women, needs to be able to see employment within the industry as a viable option.

Leanne Matthew (29), GTK’s HR Business Partner, says she has faced discrimination within the industry before her role in the business but that she used these challenges to spur herself on.

‘Manufacturing is becoming more technology-based now’

For Leanne, changing the male-dominated face of the industry and showing it as an inclusive sector will be essential to attracting young talent.

She explains: “We need to change the male-dominated image of engineering, manufacturing and other STEM sectors. If you Google them and even look at company websites, you’ll get images of men in high-vis and hard hats, and that’s only a tiny proportion of the sector’s workforce and output.

“Manufacturing is becoming more technology-based now, and you have essential roles in quality and procurement and back-office roles like HR and marketing.”

Changing the perception of manufacturing to a new sphere of employment for young people and women will help to supercharge the industry and allow it to contribute even more to the UK economy both in terms of employment and output.

The manufacturing industry has long been a key sector in the UK. Although it has experienced a few turbulent years, its forecast for 2023 is promising; and it could even help us mitigate the effects of a recession.

For the sector to fulfil its role in leading the charge out of the recession, it requires support and an influx of new talent; and if that is achieved, the future is bright for UK manufacturing.