News | Published December 07 2019

UCB Group offer positive inside view of manufacturing sector despite negative PMI outlook

The latest IHS Markit/CIPS numbers from the manufacturing sector have revealed that workers are being made redundant across British factories at the quickest rate in seven years and broadcast a negative outlook for the industry.

The purchasing managers’ index [PMI] was down to 48.9 in November, a 0.3 decrease on October. It has been below the 50 mark, the point that differentiates expansion and contraction, for seven months.

Political and economic uncertainty have been cited as blame factors, with employment in the manufacturing sector down for an eighth consecutive month and the rate of job losses the fastest since September 2012, as manufacturers are forced to implement cost-cutting measures.

Factories have been running down stocks built up toward the now defunct October 31 Brexit deadline, output was down at a faster rate than previous readings. This coincided with a decline in new orders and a steep drop in export orders, reflecting tough conditions in the Eurozone also.

In the Eurozone there was a tenth successive month of decline in manufacturing activity, with the PMI reading rising to 46.9 in November, a 1.0 rise from the previous month, indicating a slowing rate of regression. Germany’s export-heavy factory sector was the worst performer.

Rob Dobson, a director at IHS Markit, laid the blame squarely on prolonged Brexit delay and the general election as the root cause for the sector’s weakness, saying: “November saw UK manufacturers squeezed between a rock and hard place as the uncertainty created by a further delay to Brexit was accompanied by growing paralysis ahead of the forthcoming general election.

“Destocking at manufacturers and their clients following the latest Brexit delay was a major contributor to the weakness experienced by the sector. Inflationary pressures meanwhile showed signs of moderating further, with input costs falling slightly for the first time since March 2016.”

However, the view from within the sector is not as negative as the figures suggest. In fact, one firm, United Bast Bar Group [UCB], Europe’s largest continuously cast iron bar producer, is more than optimistic for the future of manufacturing, even after Brexit.

For certain, Brexit is as relevant to UCB as it is to anyone. The business came about in 1998 after a merger of three of Europe’s most prestigious continuous cast iron bar foundries and their associated stockists and service centres. It has an annual production capacity of 80,000 tonnes across foundries in Britain and Spain, with its world headquarters in Chesterfield, Derbyshire. 90 per cent of its production is exported, with its largest market being Germany, at the heart of the Eurozone.

Managing director of the foundries, James Brand, told The Parliamentary Review which factors fuelled this positive outlook, even in the midst of the negative outlook projected by the PMI statistics and the high rate of redundancies.

Brand said: “UCB’s operational efficiency combined with our clever thinking and smarter management, has enabled us to survive economic downturns over the years. I personally believe it is the manufacturing industry’s ability to adapt and evolve during the economic crises of the last couple of decades that has enabled so many companies in the sector to survive and actively support the UK economy during periods of turmoil.

“We are constantly striving to be ahead – whether that’s through quality of product or reducing operational costs – and this has served us well.”

Even in the aftermath of the referendum on EU membership in 2016, Brand believes that UCB has been able to balance its costs and remain competitive with the European market.

He explained: “Since December 2016, we have also benefited from the government’s support of energy intensive industries (EIIs). Thanks to strong lobbying and support from UK Steel, of which we are an active member, renewables obligation (RO) and feed-in tariffs (FIT) are now subject to rebate.

“This has had a positive impact on balancing energy costs, enabling us to remain competitive within the European marketplace.”

Although Brexit delay and the impending general election have left businesses caught up in a sector-wide slowdown, Brand is optimistic that once Brexit is finalised, the outcome will be positive for both UCB and the wider industry, praising the manufacturing arena for its resilience and expressing faith that it will continue to thrive in the face of adversity.

He said: "UCB is optimistic about the future of manufacturing after Brexit. I personally see Brexit as an opportunity for both the company and the sector itself. We manufacture great products in this country and there has been a shift, both at home and abroad, towards buying British.”

Brand also believes that higher demand for UK products will feed into Brexit negotiations for future trade deals, meaning that frictionless trade with Europe will be possible. More interestingly though, he sent a resounding message to both politicians and industry pees that British manufacturing is very much alive, despite popular belief.

“UK demand for our product is increasing and I am confident that the final agreement with the EU will have few or no barriers for trade. Manufacturing in this country is not the dying industry people have been led to believe.

"Many UK companies, like ourselves, are leading the world in what they do. Like us, they have learnt valuable lessons about survival which have strengthened their operation and created a bright, positive future which young people can become an integral part of. We’re very proud of what we do here.

“If any MPs or ministers would like to come and see first-hand northern manufacturing in action, then I invite them to come and see it here. I think they’ll be surprised.”

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Authored by

Scott Challinor
Business Editor
December 07 2019

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