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UK Manufacturing: A Growing Competitive Force Despite Challenges



In the face of formidable challenges like energy costs, labor shortages, and political instability, the United Kingdom's manufacturing sector is demonstrating resilience and newfound competitiveness on the global stage. The latest survey by Make UK and PricewaterhouseCoopers echoes a sentiment among industry leaders that the UK is strengthening its position as a manufacturing hub despite prevailing obstacles.

 

The survey, involving over 200 senior manufacturing executives, reflects a notable shift in perception. A majority of respondents believe that the UK's allure as a destination for industrial production has notably improved over the past year.


Particularly striking is the belief of nearly a third that the UK is gaining competitiveness against manufacturing giants like Germany and France, while outpacing countries such as Spain and Italy according to over a quarter of the surveyed companies.

 

However, challenges persist. The UK is perceived to be losing ground against manufacturing powerhouses like the US, China, and India. Factors such as sustained economic challenges, exacerbated by events like the Covid pandemic, Brexit, and energy price surges post-Russia's invasion of Ukraine, have contributed to this complex landscape. Despite these hurdles, industry leaders express hope for stability in 2024, citing easing inflation and the potential for Bank of England interest rate cuts.

 

The government's measures, such as investment reliefs outlined in Jeremy Hunt's autumn statement, have been positively received by UK firms. Yet, criticism persists regarding the absence of a coherent industrial strategy amidst policy fluctuations, including the watering down of net zero promises, which has dented confidence in governmental commitment.

 

Brexit remains a significant concern for businesses, with exporters facing increased difficulties trading with the EU, their largest market. The British Chambers of Commerce survey of over 700 UK exporters revealed that almost two-thirds experienced heightened challenges in selling to the EU over the past year, attributing this to Brexit-related frictions.

 

On a brighter note, separate research by Deloitte suggests a rising wave of optimism among the chief financial officers (CFOs) of the UK's major companies. Despite recent economic contraction and projections of sluggish growth, CFOs express confidence in their business prospects.


Ian Stewart, Deloitte's chief economist, notes this optimism amid softer growth, citing low unemployment rates, sustained corporate profitability, and a significant drop in inflation bolstering expectations of potential interest rate reductions.

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