West Midlands manufacturing output grows faster than national average over last quarter

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The West Midlands manufacturing sector saw strong output growth in the quarter to July, after a decline in the previous quarter with this rate of growth far surpassing the UK as a whole (+6%). That’s according to the CBI/Accenture Quarterly Industrial Trends Survey.

The pace of growth in new orders in the West Midlands was broadly similar to last quarter in the West Midlands, also comfortably above the UK average, by 11 per cent in the quarter to July.

The UK as a whole saw a slowing down in manufacturing output and orders growth to more typical rates of expansion following a period of exceptionally strong growth over the previous year.

Average costs and prices continued to rise sharply across the country, with the West Midlands seeing a greater increase in export prices (+53 per cent) than the UK average (+32 per cent). However, it is expected that this divergence will close next quarter, with export prices growth easing slightly for West Midlands manufacturers.

Across the country, average cost growth is expected to ease slightly next quarter, with prices expected to rise at a similar pace as in the quarter to July.

Optimism within the sector in the UK fell for a third consecutive quarter, with the West Midlands experiencing a similar decline in sentiment as the UK average. However, while investment intentions generally improved in the UK, investment intentions across the West Midlands in buildings (-26% from 0% in April) and plant and machinery (-19% from -2%) worsened and were well below the national averages (-7% & +17%).

In more positive news for the region, employment within the sector continued to grow at a robust pace ( up 16 per cent), with data showing the West Midlands kept up with the national average (18 per cent).

Across the UK, concerns over shortages of labour, and components and materials remained acute.

Paul Stanley, Midlands Lead for Accenture, said: “Despite facing challenging circumstances, the region bucks the trend in manufacturing output and has shown its resilience to increasing inflationary pressures.

“The West Midlands is fast-becoming a world-class technology and digital engineering hub. Businesses must continue to invest in the right technology and people in order to maintain this positive trend and ensure the West Midlands remains a crucial part of the UK economy.”

Anna Leach, CBI Deputy Chief Economist, said: “The manufacturing sector has been a relative bright-spot in our economic surveys over recent months, but with output and orders now softening, conditions are becoming more uncertain for a sector already being buffeted by high cost inflation and ongoing supply challenges.

“It is encouraging, however, to see investment intentions firming. Stronger investment will be vital if the UK is to reinvigorate growth and keep recession at bay. The new prime minister will need act quickly to fan the flames of these ambitions by announcing a permanent successor to the Super Deduction and urgently reforming an outdated business rates system that currently acts as a tax on investment.”

Nationwide, the survey, based on the responses of 237 manufacturing firms, found:

  • Business sentiment fell for a third consecutive quarter, but at a slower pace than in April (-21% from -34% in the quarter to April).
  • Output volumes in the quarter to July grew at the slowest pace since the quarter to April 2021 (balance of +6%, compared with +25% in quarter to June and a long-run average of +4%), with a similar rate of growth expected in the three months to October (+6%). Output rose in 10 out of 17 sub-sectors, with headline growth driven by food, drink & tobacco, and aerospace.
  • Average costs in the quarter to July increased at a slightly slower pace compared with the previous quarter, but growth remained well above average (+82%, compared with +87% in April and a long-run average of +31%). Domestic price growth in the quarter to July also eased slightly (+51%, from +60% in April; the long-run average is +13%). Cost growth is expected to slow a little further in the quarter to October (+77%), while prices are expected to rise at a similar pace as in the last quarter (+48%).
  • Investment intentions for the year ahead picked up in comparison to April for plant & machinery (+17% from +9%), product & process innovation (+10% from +1%) and training (+10% from -3%). Investment in buildings is expected to fall slightly over the year ahead (-7% from -6%, though this remains above the long-run average of -17%.
  • Numbers employed grew at a similar rate to the previous quarter (+18% from +21%), with a similar rate of increase expected in the next three months (+19%).