Overall manufacturing output remains some 7% below the pre recession peak and in line with levels experienced at the end of 1989. We expected too much from manufacturing in the rebalancing agenda. The average rate of growth since 1950 has been just 1.5% hence the share of output decline in an economy growing at 2.5% plus. Hopes for a manufacturing rally were rhetoric without reason. The prospect of re shoring was illusory as the plans for Jaguar Land Rover to expand output overseas demonstrate. The UK does not have a revealed comparative advantage in manufacturing to stimulate export growth. The balance of payments trade in goods will continue to deteriorate despite some improvement this year from international energy, oil and commodity prices. The UK does have a varied manufacturing base, with real strengths in transport, food, drink and capital goods. The sector can only achieve so much in international trade and will offer so little to the rebalancing agenda. We should not expect too much from our manufacturers.

1. Manufacturing Update
October 2015

2. Long Term Decline - Textiles, tobacco, chemicals
Textiles, tobacco, chemicals, rubber products, furniture, energy, (oil and gas extraction)
consumer durables, electrical equipment, computer, electronic and optical equipment.
Paints, varnishes and printing inks, dyestuffs, agro chemicals. Printing and production of
recorded media. Paper and Paper Products.
Production as a wider definition - avoid Mining and Quarrying.
Decline
Structural
Stable - Beverages, Food, Dairy
Food, beverages, (alcohol and soft drinks), utilities especially water, waste and power
transmission
Stable
Non cyclical
Growth Transport, transport equipment, aerospace, contract maintenance, repair &
maintenance of aircraft, ships and boats, machinery and equipment. Excitement in
excrement provided by development in sewerage installation and maintenance.
Good consumer sectors Soap, Detergents, Polishing, Perfumes, Toilet Preparations. In
the food sector - good growth in consumption of fish and fish products. Other foodstuffs
stable with meat consumption showing a steady increase.
Growth
Set Back Gas, other household fuels, fabricated metals, basic metals and casting,
[basic metals - iron and steel (big setback)].
Glass, clay, porcelain, stone products. [Stable and unexciting before the recession, now
stunned by the setback]
Industrial gases, [reasonable growth before setback, slow recovery]
Some chemicals, chemical products.
Set Back
Cyclical
Construction
Recovery
Manufacturing UpdateOctober 2015
Data Based on the ONS Index of Production Data : Q2 2015

3. Manufacturing UpdateOctober 2015
Data Based on the ONS Index of Production Data : Q2 2015
Gloomy data on manufacturing released by ONS …
The latest data from the Office for National Statistics continue to present a gloomy outlook for
the manufacturing sector. Output in August fell by 0.8% following a drop of -1.2% in July. We
expect manufacturing output in Q3 to fall by 1% compared to the same period last year.
For the year as a whole, we now expect growth of just 0.5% in the current year compared to
growth of 2.7% last year. Next year we forecast a slight improvement with growth up by 1.5%.
That’s more or less in line with the long run [fifty year] average. The march of the makers will
be unable to rebuild the workshop of the world any time soon and won’t hit the government £1
trillion export target by 2020.
So why is the performance of the manufacturing sector so dismal?
In the UK, retail sales are booming with sales volumes up by almost 5% in the year to date.
Car sales are soaring with registrations up 7% year on year. The housing market is
experiencing strong growth with the volume of transactions up by 6% in August following
growth of 15% last year.
Consumer confidence is improving, earnings are increasing and the jobs market presents little
threat to household prospects in the months ahead. Manufacturers should be benefitting from
sales of construction and home products but are they?
Internationally the picture is less attractive …
Internationally the picture is less attractive. World trade limps along despite a recovery in the
US and Europe. Prices are undermined by low energy and commodity prices. Margins are
under pressure as the trade weighted value of sterling is up by 5% compared to last year. The
“Sterling Effect” is much exaggerated. The pound was up by almost 7% in 2014 compared to
prior year and manufacturers still managed growth of almost 3% in the year
Sectoral Analysis holds the clue ..
In our research we analyse over 50 sectors within the manufacturing sector. Not all sectors tell
the same story. Some sectors continue in a process of long term decline, notably tobacco,
textiles clothing, computers, electrical equipment, optical equipment and consumer durables.
The housing market is bringing benefits to construction products including cement and plaster
and also leading to a rally in furniture output to levels last experienced pre recession.
Other sectors especially transport equipment are experiencing strong growth. Transport
equipment output continues to expand in the areas of wheels, wings and water i.e. Marine,
Motor and Aerospace activity. Capital goods have also enjoyed strong growth with a big
recovery in engineering and allied industries.
The food and beverages sector to experience steady and strong growth. Meat, fish and dairy
products have experienced a strong rally since 2009. Output in the dairy sector has increased
by 50% over the last six years. Bakery products are up by 25% from 2009 but have
experienced a set back into 2015, possible victims of the Mary Berry home baking craze.
Beverage sales are up especially the manufacture of alcohol products. Soaps, detergents,
polish and perfumes remain as one of the great performers in the sector with steady growth
through the recession
The manufacture of wood, rubber, paints and paper products demonstrate a shock to output in
2008/9 with little recovery to date. In the chemical and petrochemical sectors, the shock to
output is also evident with a limited recovery so far. The manufacture and processing of basic
metals remains flat with a continued setback in casting and fabrications. The manufacture of
weapons and ammunition remains some 40% below the pre recession high.
Summary …
Overall manufacturing output remains some 7% below the pre recession peak and in line with
levels experienced at the end of 1989. We expected too much from manufacturing in the
rebalancing agenda. The average rate of growth since 1950 has been just 1.5% hence the
share of output decline in an economy growing at 2.5% plus.
Hopes for a manufacturing rally were rhetoric without reason. The prospect of re shoring was
illusory as the plans for Jaguar Land Rover to expand output overseas demonstrate. The UK
does not have a revealed comparative advantage in manufacturing to stimulate export growth.
The balance of payments trade in goods will continue to deteriorate despite some improvement
this year from international energy, oil and commodity prices.
The UK does have a varied manufacturing base, with real strengths in transport, food, drink
and capital goods. The sector can only achieve so much in international trade and will offer so
little to the rebalancing agenda. We should not expect too much from our manufacturers.
JKA October 2015

4. 30
40
50
60
70
80
90
100
110
120
1950 1960 1970 1980 1990 2000 2010
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
Manufacturing Index …
October 2015

5. Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
-16
-12
-8
-4
0
4
8
12
16
1950 1960 1970 1980 1990 2000 2010
Manufacturing Quarter Rate of Change year on year …
October 2015

6. 90
95
100
105
110
115
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Production …
K222 IOP: B-E: PRODUCTION: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

7. 80
100
120
140
160
180
200
220
240
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Mining and Quarrying …
K224 IOP: B:MINING AND QUARRYING: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

8. 50
100
150
200
250
300
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Oil and Natural Gas …
K226 IOP: 06:Extraction Of Crude Petroleum And Natural Gas: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

9. 90
95
100
105
110
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacturing …
K22A IOP: C:MANUFACTURING: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

10. 90
95
100
105
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Food, Beverages and Tobacco …
K22B IOP: CA:Manufacture of Food products beverages and tobacco: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

11. 90
95
100
105
110
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Food …
K22C IOP: 10:Manufacture Of Food Products: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

12. 80
85
90
95
100
105
110
115
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Food - Meat …
K22D IOP: 10.1:Processing & preserving of meat & production of meat products:
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

13. 60
70
80
90
100
110
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Food - Fish …
K22E IOP: 10.2-3:Process & preserve of fish crustaceans molluscs fruit veg:CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

14. 80
85
90
95
100
105
110
115
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Food - Dairy …
K22G IOP: 10.5:Manufacture of dairy products: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

15. 80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Grain Mill Products …
K22H IOP: 10.6:Manufacture of grain mill products starches & starch products: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

16. 60
70
80
90
100
110
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Bakery Products …
K22I IOP: 10.7:Manufacture of bakery and farinaceous products: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

17. 70
80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Animal Feeds …
K22K IOP: 10.9:Manufacture of prepared animal feeds: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

18. 70
80
90
100
110
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Beverages …
K22L IOP: 11:Manufacture Of Beverages: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

19. 60
70
80
90
100
110
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Beverages Alcoholic …
K22M IOP: 11.01-6:Manufacture of alcoholic beverages: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

20. 80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tobacco …
K22O IOP: 12:Manufacture Of Tobacco Products: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

21. 80
90
100
110
120
130
140
150
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Textiles …
K22Q IOP: 13:Manufacture Of Textiles: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

22. 80
90
100
110
120
130
140
150
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Wearing Apparel …
K22R IOP: 14:Manufacture Of Wearing Apparel: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

23. 70
90
110
130
150
170
190
210
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Leather and Related Products …
K22S IOP: 15:Manufacture Of Leather And Related Products: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

24. 80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Wood, Paper Products and Printing …
K22T IOP: CC:Manufacture of wood and paper products and printing: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

25. 90
95
100
105
110
115
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Paper and Paper Products…
K22V IOP: 17:Manufacture Of Paper And Paper Products: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

26. 80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Recorded Media …
K22W IOP: 18:Printing And Reproduction Of Recorded Media: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

27. 80
85
90
95
100
105
110
115
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Chemicals and Chemical Products …
K22Z IOP: CE:Manufacture of chemicals and chemical products: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

28. 70
80
90
100
110
120
130
140
150
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Petrochemicals …
K234
IOP: 20B:Manufacture of petrochemicals -
20.14/16/17/60: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

29. 70
80
90
100
110
120
130
140
150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Paints,Varnishes …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K236 IOP: 20.3:Manuf of paintsvarnishessimilar coatingsprinting ink/mastics:CVMSA
October 2015

30. 70
80
90
100
110
120
130
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Soaps, detergents, polish, perfumes
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K237 IOP: 20.4:Manuf of soapdetergentspolishingperfumestoilet preparations:CVMSA
October 2015

31. 90
100
110
120
130
140
150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacture of Rubber and Plastic Products…
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23C IOP: 22:Manufacture Of Rubber And Plastic Products: CVMSA
October 2015

32. 80
90
100
110
120
130
140
150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacture of Glass, Clay, Porcelain, Ceramics …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23E IOP: 23OTH:Manuf of glassclayporcelainceramicstone prods-23.1-4/7-9:CVMSA
October 2015

33. 60
70
80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacture of Basic Metals …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23H IOP: 24:Manufacture Of Basic Metals: CVMSA
October 2015

34. 70
80
90
100
110
120
130
140
150
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Basic Iron and Steel …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23I IOP: 24.1-3:Manufacture of basic iron and steel: CVMSA
October 2015

35. 70
80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Other Basic Metals and Casting …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23J IOP: 24.4-5:Manufacture of other basic metals and casting: CVMSA
October 2015

36. 80
85
90
95
100
105
110
115
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Other Fabrications …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23K IOP: 25:Manuf Of Fabricated Metal Products Except Machinery & Equipment: CVMSA
October 2015

37. 50
60
70
80
90
100
110
120
130
140
150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacture of Weapons and Ammunition …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23M IOP: 25.4:Manufacture of weapons and ammunition: CVMSA
October 2015

38. 90
100
110
120
130
140
150
160
170
180
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacture of Computer, Electronic & Optical …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23N IOP: CI:Manufacturing of computer electronic & optical products: CVMSA
October 2015

39. 70
80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacture of Electrical Equipment …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23Q IOP: 27:Manufacture Of Electrical Equipment: CVMSA
October 2015

40. 80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacture of Cement, Plaster …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23F IOP: 23.5-6:Manuf of cementlimeplaster;concretecementplaster articles:CVMSA
October 2015

41. 70
75
80
85
90
95
100
105
110
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Machinery and Equipment …
K23R IOP: CK:Manufacture of machinery and equipment n.e.c.: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

42. 50
60
70
80
90
100
110
120
130
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacture of Transport Equipment …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23T IOP: CL:Manufacture of transport equipment: CVMSA
October 2015

43. 50
60
70
80
90
100
110
120
130
140
150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
MotorVehicles, Trailers and Semi Trailers …
K23U IOP: 29:Manufacture Of Motor Vehicles Trailers And Semi-Trailers: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

44. 40
50
60
70
80
90
100
110
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacture of Other Transport Equipment …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23V IOP: 30:Manufacture Of Other Transport Equipment: CVMSA
October 2015

45. 40
50
60
70
80
90
100
110
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Building of Ships and Boats
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23W IOP: 30.1:Building of ships and boats: CVMSA
October 2015

46. 50
60
70
80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Aerospace and related machinery …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K23X IOP: 30.3:Manufacture of air and spacecraft and related machinery: CVMSA
October 2015

47. 80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Manufacture of Furniture …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K242 IOP: 31:Manufacture Of Furniture: CVMSA
October 2015

48. 80
85
90
95
100
105
110
115
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Utilities ..
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K248 IOP: D:ELECTRICITY GAS STEAM AND AIR CONDITIONING SUPPLY: CVMSA
October 2015

49. 80
85
90
95
100
105
110
115
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Sewerage ..
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K24E IOP: 37:Sewerage: CVMSA
October 2015

50. 80
85
90
95
100
105
110
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Engineering and Allied Industries …
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
K24L IOP: EAI:Engineering and Allied Industries: CVMSA
October 2015

51. 80
90
100
110
120
130
140
150
160
170
180
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Energy
K24T IOP: MIG-NRG:Main Industrial Groupings - Energy: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

52. 90
100
110
120
130
140
150
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Consumer Durables …
K24Q IOP: MIG-CD:Main Industrial Groupings - Consumer Durables: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

53. 90
95
100
105
110
115
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Consumer Non Durables …
K24R IOP: MIG-CND:Main Industrial Groupings - Consumer Non-Durables: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

54. 80
85
90
95
100
105
110
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Capital Goods
K24S IOP: MIG-CAG:Main Industrial Groupings - Capital Goods: CVMSA
Manufacturing Update
Data Based on the ONS Index of Production Data : Q2 2015
October 2015

55. Manufacturing Update
September 2015