The changing shape of UK manufacturing Filling the gap: the role of business surveys

Presentation to ONS Business Statistics User Conference

22 October 2014

Lee Hopley

Overview

• Current trends in manufacturing – what do business surveys bring?

• Building on what is happening, with why it’s happening

• Future trends – what are the signs?

• Limitations and where we’d like some more, please

The value of business surveys?

Timing, more detail on size,

sector or region, plugging data

gaps and some thoughts on the

actions that sits behind trends.

Output and orders edge down, % balance of change in the past three months and % change on a year ago

Source: EEF Business Trends Survey and ONS

A UK growth story, % balance of change in orders in the past three months

Source: EEF Business Trends Survey

Employment heads higher too, % balance of change in past three months and % change on a year ago

Source: EEF Business Trends Survey and ONS

Sector and regional differences apparent, % balance of change in employment in past three months by sector

• Positive employment balances most like in East, E. Mids and SE over the past year.

• Employment increases planned in 2014 more likely to be permanent than temporary.

• Increases expected across all firm sizes.

• Over half of manufacturers surveyed by EEF were planning to recruit for an apprentice in 2013/14.

• And pay deals running at between 2.4-2.6%

Source: EEF Business Trends Survey

Steady prices, squeezed margins, % balance of change in past three months

-50

-40

-30

-20

-10

0

10

20 %UK margins Export margins

Source: EEF Business Trends Survey

A lot of companies planning a little investment, % balance of companies planning investment in year ahead and % balance

of change

Source: EEF Business Trends Survey and Executive Survey

What are the drivers? % of companies citing driver of increased plant & machinery investment

Source: EEF Investment Monitor

Business Surveys – The not so useful

• Short term expectations: forward-looking survey balances less

reliable indicators of future trends.

• Productivity: a pointless answer – output per hour. Companies’

judgements on productivity not always in synch with official

definitions.

• A complete regional picture: coverage is partial and sector surveys

should be considered in the round.

Current and future trends

Manufacturing strategies have

been changing and investment

priorities will continue to shift.

Can we measure them?

Intangible investment – getting more important, % of companies planning increase in investment and % citing increased

importance of intangibles

Source: EEF Investment Monitor

Manufacturing coming back – who benefits? % of companies bringing production back to UK from low cost economy

• Profitability and turnover benefits, some additional jobs of in-house reshoring.

• Bigger benefits in the supply chain.

• More scope for job creation and higher proportion of companies securing orders from low cost competitors not increase in profits.

• But finding suitable UK-suppliers is limiting reshoring possibilities.

Source: EEF/GFK Make it Britain Survey 2014

New drivers of activity in UK manufacturing, % of companies reporting as influence on UK operations

Source: EEF Innovation Monitor

Keeping on top of change

• Understanding how these changes will affect manufacturing and wider economic growth…. A few thoughts:

• International comparisons eg productivity levels as well as growth.

• A wider definition than R&D to capture innovation activity.

• Sectoral employment trends as a further indicator of expansion.

• International locations of activity by UK businesses.

Questions?