The outlook for the UK economy and manufacturing in an uncertain world Lee Hopley EEF Chief...
-
Upload
hubert-hart -
Category
Documents
-
view
214 -
download
2
Transcript of The outlook for the UK economy and manufacturing in an uncertain world Lee Hopley EEF Chief...
The outlook for the UK economy and manufacturing in an uncertain world
Lee Hopley
EEF Chief Economist
24 April 2012
OVERVIEW
• UK economy has seen some significant growth challenges
• Strong manufacturing activity has boosted the economy through the recovery so far ..
• ..but no sign that risks and challenges will abate.
• Manufacturers still in pursuit of new opportunities
• There are still some cautious signs of optimism that industry will continue to grow this year.
• … but what about the rest of the economy?
THE STORY SO FAR….
Generating UK growth proving a challenge, but not all sectors are equal
Growth, rebalancing …neither?Contributions to UK GDP growth
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2011q1 2011q2 2011q3 2011q4
Households Government Inventories
Investment Trade GDP
%
Source: National Statistics
International risks have had an impact,% annual GDP growth in 2012
-2
0
2
4
6
8
10
US
Japan
China
India
Brazil
Russi
a
Euroz
one
World
Jan-11 Jan-12• Downgrades across the board.
• Eurozone crisis abated for now, but still presents significant downside risk.
• Contraction across the bloc in 2011q4…and in 2012q1.
• But confidence indicators in Germany have picked up a bit.
• The US had a stronger 2011h2 – manufacturing doing particularly well.
• But emerging markets will lead the pack again in 2012.
Source: Oxford Economics
And manufacturing output hit in 2011q4,index of production 2008=100
Source: National Statistics
85
88
91
94
97
100
103
106
2007
q1
2007
q3
2008
q1
2008
q3
2009
q1
2009
q3
2010
q1
2010
q3
2011
q1
2011
q3
2012
q1
?
25/4/12 – GDP day!
But 2012q2 gets off to a better start,% balance of change in past three months
-60
-40
-20
0
20
40
2005
q1
2005
q3
2006
q1
2006
q3
2007
q1
2007
q3
2008
q1
2008
q3
2009
q1
2009
q3
2010
q1
2010
q3
2011
q1
2011
q3
2012
q1
Output Orders Export orders%
Source: EEF Business Trends Survey
Recruitment and investment still planned,% balance of change in past three months
-50
-40
-30
-20
-10
0
10
20
30
40
2009
q1
2009
q2
2009
q3
2009
q4
2010
q1
2010
q2
2010
q3
2010
q4
2011
q1
2011
q2
2011
q3
2011
q4
2012
q1
Employment Investment %
Source: EEF Business Trends Survey
WHERE DOES 2012 GO FROM HERE?
Manufacturers focus on growth opportunities, but downside risks to UK starting to build
Sharp turnaround in expectations,% balance of change expected in next three months
-50
-40
-30
-20
-10
0
10
20
30
40
2005
q1
2005
q3
2006
q1
2006
q3
2007
q1
2007
q3
2008
q1
2008
q3
2009
q1
2009
q3
2010
q1
2010
q3
2011
q1
2011
q3
2012
q1
Output Orders%
Source: EEF Business Trends Survey
Firm-level indicators to end the year higher,% of companies expecting change in 2012
0
20
40
60
80
100
Permanentemployees
Temporaryemployees
UK sales Export sales Profitmargins
Productivity
% Increase Same Decrease
Source: EEF Executive Survey 2012
Manufacturers identify growth opportunities,% of companies
0 10 20 30 40 50 60
New technology/product development
Demand for low carbon goods & services
Demand for lower cost goods & services
Diversification into new supply chains
Demand for products in emerging markets
Demand for services in new markets
%
Source: EEF Executive Survey 2012
50% of exports not destined for EU,% change in manufactured exports by destination 2011
-20
-10
0
10
20
30
40
50
Total
EU
MENA
Irela
nd
Portugal
Spain
Brazil
China
Indi
a
Russia US
%
Source: HMRC
Growth from a broad base of markets,% expecting growth in markets in next 12 months and 5 years
0 10 20 30 40 50 60 70 80
Turkey
Russia
Brazil
China
Gulf states
India
SE Asia
Developed countries
%
Next 12 months
Next 5 years
Source: EEF Manufacturing Focus Survey
Progress in difficult markets,% of companies see barrier to emerging market entry
0 10 20 30 40 50 60
Differences in business practices
Exchange rate
Lack of knowledge about opportunities
Language difficulties / barriers
Poor credit protection
Shipping costs
%
Source: EEF Manufacturing Focus Survey
Longer term trend heading in one direction,% share of global output
China
Rest of World
US
EU
Japan
S America
Asia (exc China)
MENAIndia
ChinaRest of World
US
EU
Japan
S America
Asia (exc China)
MENAIndia
Source: Standard Chartered
2010 2030
Challenges still on the horizon,% of companies citing risk to growth in 2012
0 20 40 60 80 100
Significant movements in exchange rates
Global economic downturn
Deterioration in workplace relations
Significant upward pressure on pay
Access to external finance difficulties
Financial crisis
Raw materials shortages
%
Risks to growth
Most significant risk
Source: EEF Executive Survey 2012
Overall UK outlook more challenging
Investment outlook – Investment intentions not translating into increased capex. Credit cost remains elevated and EEF credit conditions shows limited signs of sustained improvement in availability.
Labour market – Labour market prospects still look weak; claimant count levels high. Proportion of temporary workers wanting permanent job growing and share of long-term unemployed rising.
Consumer – Confidence indicators are low, but stable. Economic situation weighing on consumers, household belt-tightening set to continue.
Recovery momentum to pick up in 2013,% annual change in output
0
1
2
3
2011 2012 2013
Manufacturing GDP%
Source: EEF
Conclusion
• A more challenging period
• The recovery in the economy and manufacturing entered a more challenging period at the end of last year after shaking off the effects of temporary disruptions.
• A more uncertain environment
• The potential for further euro-wobbles still present one of the biggest risks to growth.
• But still a more sustainable platform for growth
• Over the longer term, growth founded on higher investment and net exports offers a more sustainable platform for growth. Manufacturing is at the heart of this.