The majority of UK manufacturers are confident about their growth prospects in 2018, according to the latest Business in Britain report from Lloyds Bank.
The survey of over 200 British manufacturers – two-thirds of them exporters – found that 59% are expecting business activity to increase over the next 12 months.
Although this is down marginally from 62% in July, the percentage of firms confident of growth in 2018 is higher than the pan-sector UK average of 56% and six points above the level recorded by manufacturers immediately after the EU referendum.
A third of firms in the sector (33%) are expecting to step up investment this year and only 18% plan to invest less. Meanwhile, one in four (26%) manufacturers expect to create jobs in 2018 and most think their turnover will either increase (47%) or hold steady (37%).
This confidence is underscored by strong order books, with half (48%) expecting to grow their order books during the next six months. Only 14% think their pipelines will shrink.
There is also evidence that manufacturing firms are continuing to target more efficient growth, with 41% planning to automate part of their business to boost productivity.
Dave Atkinson, UK head of manufacturing at Lloyds Bank Commercial Banking, said: “The picture painted by our latest Business in Britain survey is a reassuring one, with manufacturers in buoyant mood.
“Over the past six months, many have grown their order books and this is giving them the confidence to make investment plans.
“Uncertainty remains but there is every reason to believe the sector will continue to be resilient during 2018 and beyond.”
Among the headwinds highlighted by manufacturers were issues with recruitment, currencies and input costs.
Half (50%) of firms said they had struggled to recruit skilled workers in the past six months. Some 54% said they are more concerned about foreign exchange movements than they were six months ago and 52 per cent said theirs fears over commodity prices had increased.
Almost three-quarters (71%) of exporting manufacturers said exchange rate volatility or the introduction of trade tariffs as the UK leaves the EU were likely to be the key challenges to their international trading in the future.
However, most exporters are confident about the UK’s prospects outside the EU. Almost half (47%) said they expect Britain to become more competitive internationally in the next five years and 26% predicted things would remain the same.
Atkinson added: “The challenges faced by manufacturers are broadly the same ones that have affected them over the past 18 months since the EU referendum – fluctuating currencies and rising input costs as well as the ongoing challenge of finding the right people with the right skills. Nevertheless, the evidence is that many see an opportunity to use Brexit as the springboard to sell their goods and services further afield.”
The wider Business in Britain survey of 1,500 businesses across all sectors and regions found that the confidence index – an average of respondents’ expected sales, orders and profits over the next six months – was steady at 23% compared with 24% in July 2017. It remains above the lows recorded immediately after the EU referendum.