When will there be good news?

Business Insights
29/11/2017

Well now, actually.


Order books are up, foreign investment into the UK is at a high not seen since before the financial crisis and the government is undertaking a pro-active programme of investment with the Industrial Strategy.


In fact despite the background of economic uncertainty generated by the protracted Brexit negotiations, UK industry is doing rather well according to the latest CBI monthly Industrial Trends Survey.


The survey found that far from being in decline, manufacturing orders are at their strongest for nearly 30 years, thanks to accelerating demand in the three months to November, when order books continued to fill up. Total orders were, by a small margin, the strongest since August 1988, while export order books were the joint highest in more than 20 years.


The improvement in total order books was particularly marked in food & drink and chemicals, while export order books strengthened notably in chemicals, electronics and transport goods.


Manufacturers continue optimistic, expecting output to growth to accelerate in the coming quarter, with 27% predicting volumes to increase, and 14% expecting a decline, giving a rounded balance of +13%.


While the increase is good news in itself, better news still comes from the 19% of companies which expect average selling prices to increase in the coming three months, with only 2% predicting a decline, giving a balance of +17% - significantly above the long-run average of +2%.


Manufacturing’s steady growth is seeing its reward, not just in improved growth, and the prospect of higher prices, but in government investment in the shape of the Industrial Strategy which will invest £725 million in new programmes to capture the value of innovation but also in renewed inward foreign investment into the UK.


The announcement of several key developments such as the world leading US life sciences company, MSD’s, major investment into the UK economy by the opening of a new state-of-the-art UK hub, will help to ensure innovative research into future treatments for patients and pioneering medicines is completed in Britain.


Also in the Life Sciences sector, leading diagnostics company, QIAGEN, in partnership with Health Innovation Manchester, has the intention to develop a genomics and diagnostics campus in the city.


In fact, while the Brexit vote last June led to fears that investment could dry up amid uncertainty over the UK’s future trading relationship with the EU, a string of companies have since announced plans to expand in the UK.


This includes ABInBev’s £79bn takeover of SAB Miller to create the world’s largest beer company, oil major Shell’s £34bn acquisition of BG Group, and Softbank’s £24bn purchase of ARM Holdings. Qatar, according to a recent announcement is also planning to pump an additional £5bn into the UK to invest in infrastructure.


According to the OECD (Organisation for Economic Co-operation and Development) Britain is the number one destination in Europe for foreign direct investment. Figures show a surge in inward investment to levels not seen since before the financial crisis, and the highest since 2005.


The figures also showed the UK drove the bulk of the 17pc increase in FDI inflows to the European Union. Britain also climbed above Ireland, Switzerland, the Netherlands and France to become the top destination for inward FDI across Europe and second only to the US in the OECD club of 35 rich economies.


Maria Borga, senior statistician at the OECD’s investment division, said the sharp increase was a sign of “confidence in the economy”.


While she said the fall in the value of the pound was likely to have been a factor behind the increase in investment, she said Britain’s underlying appeal also played a role.


“The data show the UK remains attractive,”

said Ms Borga.


As part of the Industrial Strategy, which is designed to boost productivity, alongside the Life Sciences Sector Deal, Whitehall has agreed deals with the construction, artificial intelligence and automotive industries. Each deal, said the Department, represented a new strategic and long-term partnership with Government, backed by private sector co-investment.


Business Secretary Greg Clark said:

“Powered by new technology, new industries are being created, existing ones changing and the way we live our lives – as workers, citizens and consumers – transformed.”


Industry is responding to the new optimism as Anna Leach, CBI Head of Economic Intelligence, said:


“UK manufacturers are once more performing strongly as global growth and the lower level of sterling continue to support demand. Output growth has picked up again, and export order books match the highest in more than 20 years.”