The manufacturing sector in the UK has been somewhat subdued of late but there is still activity to be found and certain areas around the country are looking particularly strong.
Released today (3 August 2015), the latest Markit/CIPS UK Manufacturing PMI recorded 51.9. While this is still close to the growth cut-off figure of 50, it is an improvement on June's index, which recorded just 51.4 – a 26-month low.
The industry welcomed the increase, but it still remains below the average for the current sequence of growth, which began back in 2013.
Rob Dobson, senior economist with Markit, commented: “Although an uptick in the headline PMI breaks the decelerating trend in UK manufacturing, growth remains near-stagnant and suggests that the sector is continuing to act as a drag on the economy.”
The PMI comes after the last week's (30 July) publication of the EEF Regional Manufacturing Outlook which found that Wales and the East Midlands were both showing particularly high levels of activity with GVA in these regions both registering above 15 per cent.
For Wales, transport, metals and machinery were the top three sectors influencing this strong performance. Transport also performed well in the East Midlands ranking as the second strongest sector, with food and drink in first place and rubber and plastics in third.
On the other end of the scale was the South East, which recorded a GVA of less than ten per cent. Overall, output was weak in the region, but electronics and pharmaceuticals did manage stronger performance than other areas.
Domestic Market Holding up the Market
Back to the PMI data and it's clear that it's the domestic market that is keeping things moving as the sterling-euro exchange rate continues to sap export demand. Mr Dobson added: “The struggling manufacturing sector, and the impact of the strong pound on export performance, will be a worry for the Bank of England.
“However, with the goods-producing sector accounting for only one-tenth of the economy, these woes may take second place to the health of the far larger services sector in determining the timing of the first interest rate hike, suggesting firms will have to adjust to the pound trading at its current highs.”
What will all this activity – or lack of activity – do to the number of manufacturing businesses for sale?
Clearly the slow performance from manufacturing is having an impact on how buyers feel about the arena. Analysis from law firm Irwin Mitchell, using data from Experian, found that M&A activity among Yorkshire-based manufacturing companies dropped by 44 per cent in the second quarter of 2015 in comparison to the figure for the first three months.
Yorkshire wasn't top of EEF's regional analysis, but it wasn't bottom either, showing between 14 and 15 per cent GVA.
Andrea Cropley, partner and head of corporate with the law firm in the north of England, said she expects that activity will remain subdued until “the sector as a whole shows signs of consistent improvement”.
Our team at the Business Sale Report posted 21 manufacturing businesses for sale in July. It certainly wasn't our most popular sector for listings or for potential buyers looking to buy; perhaps wisely many people are holding off and waiting for improvements before investing in the creeping industry.
For some more experienced buyers, it might be the time to find bargains as people look to offload businesses or divisions in the underperforming industry. But if such a leap of faith is to be taken then due diligence will be more important than ever in assessing potential acquisitions and keeping a close eye on the market will no doubt the key.