Britain’s largest manufacturers are anticipating a dramatic increase in orders and output in the second half of the year. However, a chronic shortage of skilled workers is threatening the ability of some companies to conduct business effectively.
According to a survey by the trade body Make UK, manufacturing is returning to normal business conditions after the turbulent demand swings during the pandemic, price disruptions following the Russian invasion of Ukraine, and the impact of supply chain blockages and conflicts around the Suez Canal. The survey, which included 320 companies, revealed a notable improvement in order books, with the share of businesses experiencing growth doubling in the past three months.
This growth has been largely driven by exports, particularly due to strong demand from the US, which has compensated for sluggish domestic conditions. With cooling prices and potential interest rate cuts, there is optimism for much stronger growth in the latter half of the year. Business confidence has surged, reaching its highest level in the past decade.
Make UK predicts that manufacturing will grow by 1.2% in 2024, surpassing the expected GDP growth of 0.9%. Despite this optimism, the sector is facing a significant challenge due to a shortage of skilled workers. This issue, according to companies, should be a central focus for the next government’s industrial strategy.
Both Labour and the Conservative parties have proposed measures in their election manifestos to address the skills shortage, though Make UK describes these as only partial solutions to a decade of apprenticeship system mismanagement. Prime Minister Rishi Sunak has pledged to close underperforming university courses to fund 100,000 new apprenticeship places over the next five years. Meanwhile, Labour plans to introduce a new growth and skills levy, allowing employers to spend up to 50% of their apprenticeship levy on accredited non-apprenticeship training, thereby offering more flexibility in fund allocation.
James Brougham, a senior economist at Make UK, emphasized the importance of a comprehensive and long-term industrial strategy. He noted that manufacturers are finally seeing signs of growth and a more favorable economic outlook. He stressed that the next government must capitalize on this positive trend by implementing a robust industrial strategy that extends beyond the 2030s and has cross-government support. He highlighted the critical need for a revolution in skills training, as the shortage of skilled workers is not only hindering companies’ growth prospects but also affecting their daily operations and ability to fulfill contracts.
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