Annual survey highlights importance of manufacturing to West Midlands economy

GKN Aerospace manufacturing
GKN aerospace manufacturing

A new report out today from Make UK, the manufacturers’ organisation, and accountancy and business advisory firm BDO LLP reveals the continuing importance of manufacturing to the success of the West Midlands economy overall, being the third biggest manufacturing in the country worth £21.7 billion in the last year.

The report, analysing the overall status of industry in the region over the last year, highlights that industry also accounts for 16.5% of the West Midlands economy – substantially higher than the national average of 10%.

Most of the economic indicators have been volatile across the region in the last year which is consistent with a more difficult trading environment generally, Brexit uncertainty, a European slowdown and the structural changes affecting the automotive sector in particular to which the West Midlands has a high exposure.

The transport sector of which automotive is a part accounts for 36% of industrial output in the West Midlands which is by far the highest proportion accounted for by one sector in any UK region. The decision in this sector have also impacted on those who make metal products (17%) and rubber and plastics (8%).

The West Midlands also continues to be a strong export performer, accounting for almost 10% of total UK manufacturing exports. However, in contrast to most UK regions the West Midlands has a relatively low level of exposure to the EU (44.9% of exports) but one of the highest exposures to the North American and Asian markets.

Jon Gilpin, head of manufacturing at BDO in the Midlands said: “The West Midlands is synonymous with manufacturing, but with above-average exposure to the automotive sector, manufacturers face the possibility of severe supply chain disruption and impact to production if faced with a no deal Brexit.

“Companies are already holding back on investment as a result of the prolonged period of Brexit instability and risk lagging behind their global competitors when it comes to the uptake of industry 4.0 processes and technology. It will be difficult for many manufacturers to regain lost ground in these areas particularly as digital transformation picks up pace.

“The region’s contribution to the overall UK economy should not be underestimated.”

Charlotte Horobin, Region Director for Make UK in the Midlands, added: “The last year has seen a strong though volatile performance, despite the uncertain political environment and global markets.

“There are well documented challenges going forward, not least Brexit uncertainty, structural change facing the automotive sector and the global economic downturn.

“Despite this, those companies who invest and innovate will still have the best long term prospects and can contribute to raising the productivity performance of the region and the UK as a whole.”