It has been a bad week for manufacturing and no amount of spin can change that.
As the latest CBI Regional Trends Survey has shown, confidence levels in the West Midlands’ manufacturing industry are at their lowest level for a decade.
The region is now officially one of the worst affected manufacturing areas in the UK with orders and export levels both down and unemployment up.
Industry insiders have now begun to whisper what they had previously only thought: “Recession is now a real risk”.
The gloom has been compounded by the latest survey from the Chartered Institute of Purchasing and Supply (CIPS) which shows that activity in the manufacturing sector fell at its fastest pace for nearly a decade during July.
Firms face a “dangerous combination” of worsening market conditions and record cost inflation, CIPS said.
The latest CIPS/Markit Purchasing Managers’ Index (PMI) fell to 44.3 last month – the lowest since December 1998 and worse than many had expected.
An index reading under 50 signals industry contraction and July’s gloomy result was a third successive month of falling activity.
Tom Lawton, national head of manufacturing sector for BDO Stoy Hayward in Birmingham, said the situation was giving cause for concern although there were still some manufacturers brave enough to predict growth.
“The PMI index is one of the important indicators of the health of the manufacturing sector and a declining trend and an average score of below 50 is a cause for concern,” he said.
“Given the general economic background a continued fall in the index is perhaps not unexpected but is a trend that needs to be monitored to see how low the average score falls to in coming months. “However, the latest compilation of research by BDO Stoy Hayward, conducted in partnership with EEF, shows that manufacturers were still expecting an overall growth in orders and output over the next three months,” he added.
Mr Lawton said his overall feeling was that the pressures on the general economy were starting to be felt by manufacturing in the Midlands and while trading was still positive in many respects the PMI showed the need for manufacturers to be focused on ensuring the basics of their businesses over the coming months.
One bright spot in an otherwise bleak period has been the resumption of production at Longbridge.
The first of the Shanghai Automotive-backed MGs rolled off the production lines at the factory on Friday and are destined for showrooms next month.
No figures have been provided by the company on what likely volumes will be, although it is thought that no more than 5,000 a year are likely to be made. Claims have been made that 700 could be produced between now and the end of the year.
Whether this will be enough to satisfy demand, if that demand still exists, remains to be seen. It will be interesting to monitor the situation during the coming months and to see how sales develop.
But whatever happens, the assembly of the cars is only ever going to be a niche business with very small volumes.
Those expecting a return to the glory days when the factory turned out hundreds of thousands of cars a year will be disappointed – this is never going to happen again.
Still, the research and development arm of the business looks set to thrive as the Chinese owners look to take advantage of the wealth of knowledge and skills that still exist in the region.
