The EU is the principle export and import market for UK manufacturers
55% of UK manufacturers expect exports to increase over the next two years
However, only 30% increased exports over the past 12 months
The critical importance of the trading partnership between UK manufacturers and the European Union has been highlighted in a survey conducted by Deloitte, the business advisory firm.
"Made in the UK" is the first in a series of quarterly Point of View surveys from Deloitte examining the critical issues for UK manufacturers trading in the global marketplace. The findings of the first survey reveal that 84% of respondents regard the EU as a principle export market, followed by North America (44%) and Asia, excluding China (30%).
Ninety-four per cent (94%) of respondents export at least some of their manufactured output, with more than a third (35%) exporting over half of their production. Most saw their biggest challenge as achieving the efficiency necessary to be able to compete internationally on price.
The findings illustrate that the comparative weakness of sterling has not yet boosted exports as much as may have been anticipated with fewer than one in three manufacturers (30%) saying their exports had increased over the past 12 months. However, 94% said they expected export figures to either remain the same (39%) or increase (55%) over the next two years.
David Raistrick, UK manufacturing industry leader at Deloitte, commented:
"Despite market predictions that the low value of sterling would dramatically drive up UK exports, the results illustrate that this has not happened as yet. I anticipate that as the EU and US pull out of recession, their demand will increase and the effect of the low value of sterling will drive our export market in overall terms. I think the industry will see an even higher percentage of manufacturers boost their exports over the next two years than our findings suggest."
When questioned on the import market, the overwhelming majority (85%) said they imported some of their materials from within the EU whereas Chinese parts were only sourced by 41% of respondents. An even smaller 38% of manufacturers surveyed sourced some of their imports from North America. Overall, 33% source over half of their materials from overseas markets and over the past 12 months only 15% have decreased the proportion of materials sourced from overseas despite the increasing cost caused by the decline in the value of sterling.
The survey also looked at UK manufacturers’ attitudes to emerging economies, finding that 35% of manufacturers were outsourcing production to a lower cost country.
David Raistrick added:
"Our findings suggest that UK manufacturers have engaged more with Europe than they have with the US and Asia. This contrasts with the US manufacturing model which has seen a greater amount of outsourcing to China. The fact that the bulk of our production takes place at home is not a bad thing, given that the UK is the 6th largest exporter of goods and related services in the world and that this industry still makes up almost 20% of UK GDP.
"Confidence appears to be returning to the sector with the overwhelming majority of surveyed manufacturers confirming their commitment to maintaining staff levels as well as a third stating that their banks had been very supportive. However, two thirds (66%) believe that the manufacturing sector is unlikely to gain any ground over the services industry. Against this backdrop, it is disappointing to see that manufacturers are pessimistic about the industry’s contribution to the rebalancing of the UK economy. The manufacturing sector’s role in lifting the UK out of recession should not be underestimated; neither should our technical capabilities which are gaining ground on other jurisdictions particularly in the high tech and environmental technology areas."