UK manufacturers expect growth in the second half of 2024

Britain’s biggest manufacturers expect orders and output to rise dramatically in the second half of the year, even as a chronic shortage of skilled workers is threatening some companies’ ability to do business.

Manufacturing is returning to normal business conditions after wild swings in demand during the pandemic, price disruptions following Russia’s invasion of Ukraine and the effect on supply chains of the blockade and conflict over the Suez Canal, according to a survey of 320 companies by trade body Make UK.

The proportion of manufacturing businesses experiencing an improvement in their order books has doubled in the past three months, Make UK said. Growth has been powered by exports, with strong demand from the US making up for sluggish conditions at home. But cooling prices and a possible cut in interest rates have raised hopes for much stronger growth in the second half of the year and business confidence has risen to its highest level in a decade.

Make UK expects manufacturing to grow by 1.2% in 2024, beating GDP growth of 0.9% for the year. But optimism in the sector has been dampened by a shortage of skilled workers that should be at the heart of the next government’s plans for the industry, companies said.

The measures proposed by Labor and the Tories in their election manifestos were only partial solutions to a decade of mismanagement of the apprenticeship system, Make UK said.

Rishi Sunak has pledged to close underperforming university courses to fund 100,000 apprenticeship places over the next five years. Meanwhile, Labor said it would allow employers to spend up to 50% of their apprenticeship levy on accredited non-practice training under a new growth and skills levy, giving them greater freedom in how how they spend their funds.

James Brougham, a senior economist at Make UK, said: “Finally, manufacturers can see concrete signs of growth and a much better economic outlook ahead… The next Government should capitalize on this scenario by providing a modern and long-term industrial strategy that goes beyond the 2030s and has intergovernmental support.

“This must be supported by a revolution in skills, the lack of which is the biggest factor affecting not only companies’ growth prospects, but, in many cases, their ability to sustain day-to-day operations and fulfill contracts.”