UK manufacturing is making a big come back, June showed the fastest rate of growth in seven months. Igniting hopes for yet another quarter of powerful GDP growth, while simultaneously bolstering the feeling economists have of a potential interest rate hike before Christmas.

With the Markit/Cips survey showing manufacturing activity at 57.5 during June (increased on 57 in May) which is way above the 50 line which divides contraction and growth, has taken economists of guard. The consensus had been that the index would in fact show a slight drop however, as it stands, the pound sterling has surged to $1.7136 (highest point since October 2008) as traders have started betting on that early base rate hike.

With the pound currently sitting at €1.2513 and rising you can bet this turn of events has turned a few heads in the EU. Markits’ Rob Dobson suggested that the data coming out of the manufacturing sector, was the icing on the cake for “one of the best quarters for the sector over the past two decades”. With manufacturing reporting work growth in EU, Asia and the Middle East the rate of export orders has hit a five-month high.

The manufacturer’s organisation EEF’s Lee Hopley stated:

“We’ve seen a big focus on new product and service innovation across industry over recent years and this survey provides a bit more evidence that this paying off with companies securing new business off the back of it”

Small Business Britain, has huge potential

The trickle down of this growth to SME’s can be seen in the large jump of employment currently being enjoyed, as companies and manufacturers alike are taking on more and more staff to tackle the ever growing work orders. As an added bonus output prices are showing growth, as January was the last time any increase was shown.

ONS (Office for National Statistics) noted a 1.5 per cent increase of manufacturing output for the first quarter of 2014, with the general consensus being that we’ll see similar growth in the second quarter. The slight downside perhaps, is that manufacturing out remains 7.5 per cent below the peak of first quarter 2008. BNP Paribas David Tinsley said:

“As this news flow is absorbed further, expectations for the first rate hike in Q4 this year should harden”

This news, however has created a rift between economists. Some are now pushing the notion that the rate of expansion will actually accelerate from here on.

“Growth may have picked up pace in Q2” Martin Beck stated. “We expect a quarterly expansion of around 1 per cent, which would be the highest rate since 2007.”

A large player in this overall growth increase has been the defence industry, with the construction of the HMS Queen Elizabeth (The Royal Navy’s new aircraft carrier, at 65,000-tonnes, She’s not only the largest military vessel in Europe, she’s the largest outside of the US fleet) taking the limelight.

In Regard to HMS Queen Elizabeth’s construction Defence Secretary Philip Hammond stated:

“The engineers, designers, steel-cutters, welders, plumbers, electricians, software writers and the many other trades that are required to build complex warships, from Rosyth to Appledore, from the banks of the Clyde to the shores of the Solent; together they have demonstrated what a united Britain can accomplish.”

“As a warship in service, she will not just be a military capability but a giant floating advertisement for the high calibre of Britain’s manufacturing and industrial base. The Queen Elizabeth will demonstrate that not only can we punch above our weight militarily, but also that we have the skills and ingenuity in this country to rival any in the world.”

If you’re good at something, never do it for free

An advertisement it has indeed been, many of the manufacturing company’s responsible for her construction, turned to freelancers and contractors to take up the slack (A trend that has led to considerable more call for high quality freelancers/contractors).

But it doesn’t stop with the UK’s flagship, BAE systems and a number of other defence contractors are turning to UK based Tech SMEs/Freelancer/Contractors due to the UK being ideally located between the US and the EU. And with the UK government offering tax incentives for R&D centres, it’s not hard to see why. Overall British industry is undergoing radical improvement and looks to be entering a new area of investment and growth.

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About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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