February 2021

n COMMENT AN END IN SIGHT TO TUNNEL VISION? So, here we are at the start of 2021, and the path ahead does not seem much clearer than it did at the end of 2020. Concerns about virus mutations, vaccine supplies, education and life outside of the EU are still dominating our lives. And although there is constant talk about light the end of the tunnel, that tunnel seems to get longer by the day. The Confederation of British Industry’s latest quarterly survey of industrial trends seems to confirm that most manufacturers are still uncertain about the future. After remining flat during the second half of 2020, business sentiment among manufacturers has now dropped“significantly”and optimism about export prospects has also continued to fall. The survey of 291 manufacturers found that new orders fell moderately in the three months to January, after stabilising in the previous quarter and for five quarters in a row before that. There was a sharp decline in domestic orders, while export orders fell at a similar pace to October. Manufacturer’s intentions to invest in plant, machinery and innovation have deteriorated, while they expect little change in their expenditure on training during 2021. Almost half of UK manufacturers – the highest share since January 1975 – are worried that access to materials or components may limit their output during the quarter ahead. But the news is not unremittingly gloomy. Manufacturing output stabilised in the quarter to January, following 15 consecutive months of decline. And while employment in the sector fell again in the last quarter of 2020, it declined at is slowest pace since October 2019. The CBI’s chief economist, Rain Newton-Smith, reports that “manufacturers across the board are continuing to battle major headwinds…With growing costs and materials shortages mounting further pressure on firms at a time when they’re experiencing much less demand, the Government mast avoid tapering off existing business support with a cliff edge in March.” “Acting swiftly ahead of the Budget to boost cash flow and shore up resilience will be essential,”she continues.“Crucially, extending the Job Retention Scheme and repayment periods for VAT deferrals until the end of Q2 will go a long way.” Tom Crotty, who chairs the CBI Manufacturing Council and is group director at Ineos, adds that“most manufacturers will have been glad to see the back of 2020, but firms continue to operate in very difficult circumstances and the impact of this is being felt across the sector. But he also strikes a more positive note.“While the start of 2021 is challenging, the Covid-19 vaccine drive brings with it a real sense of optimism for the future. “The manufacturing sector can be an engine for UK’s economic recovery post-Covid and firms are keen to work with government to make this happen,”he says.“In the meantime however, it’s essential that the sector receives the support it needs to get through the next few critical months.” Crotty is probably echoing the views of most manufacturers. Let’s hope that his pleas as heeded and that his optimism is borne out. Tony Sacks, Editor