The end of 2015 marked UK manufacturing’s lowest point in six years, according to influential trading organisation the Engineering Employers’ Foundation.
A slowdown in demand for commodities, as well as a crash in oil prices, were mostly to blame. The EEF has cut its 2016 forecast for UK manufacturing growth from 0.8% to 0.6%.
However, a poll of 369 companies found that despite such a sustained fall in output, there are signs of hope in the sector in 2016 as the amount of orders has stabilised and may even improve in the second quarter.
Lee Hopley, the chief economist at the EEF, said that although the slide had probably “bottomed-out” there was still a lot of concern for the future. “Manufacturing is still in negative territory and faces a precarious climb back up amidst a storm of real uncertainty.”
Hopley also blamed rising business costs and the fall in companies viewing the UK as a competitive place to do business as the major risks to growth going forward.
“We’re urging the Chancellor to take this message on board and signal support for the sector by avoiding creeping cost and policy changes in the next budget,” he said.
The EEF’s survey notes that certain sections of UK manufacturing had a brighter outlook than others. Industries such as transport, chemicals and pharmaceuticals recorded more optimism than steel and energy companies, where the commodity crash has hit particularly hard.
According to Reuters, the Bank of England has pledged to cut interest rates or expand its bond buying programme to counter any obstacles to British growth.
The EEF recently said the uncertainty surrounding Britain’s potential exit of the EU was adding to manufacturing woes, and that a ‘yes’ vote could plunge Britain into the “abyss”.