Manufacturing: is NI bucking the global slowdown?
Global manufacturing and industry stalwarts such as Germany are feeling the slowdown. So, why are Northern Ireland’s makers and engineers bucking the trend? John Mulgrew takes a look at our top performers and what may be skewing the figures
If there’s been an industry yet to be tainted by the ill-effects of the run-up to Brexit that I, or other journalists haven’t written about, I’d be very surprised.
The latest economic metrics and predictors have been tarred by the three years of uncertainty and political instability. But, according to the latest purchasing managers’ index (PMI) from Ulster Bank, manufacturing here has seen an uplift – unlike the other sectors.
Globally, however, the growth of the manufacturing sector has slowed closer to stagnation, sitting at 50.7 in January (where 50 is no growth) according to the JP Morgan Global Manufacturing PMI.
“At the moment, exports are falling in German manufacturing,” Richard Ramsey, Ulster Bank chief economist said. “Northern Ireland and the UK compare favourably to the German powerhouse, and countries such as France and Italy.”
He says that nine out of the 30 nations which are recorded by PMIs show manufacturing is falling.
For Northern Ireland and the UK as a whole, Brexit-related stock-piling is certainly a factor. Let’s say you’re a cross-border business and you could be burdened by World Trade Organization (WTO) tariffs on your exports to the Republic in the event of a hard exit. What do you do? You produce more, and warehouse in your export market.
Graeme MacLaughlin, relationship director, Barclays in Northern Ireland, said the “underlying state of health of UK manufacturing continues to be obscured by stockpiling, albeit down from the last survey’s record high, as Brexit uncertainty still thwarts investment intentions”.
Ulster Business has revealed in this magazine that one major manufacturer, which has its base here, had stockpiled more than £1m in food stock for its market in the Republic amid border concerns – and is now left with huge levels of product in a warehouse, with the exit from the EU now not likely until Halloween.
“Continuing increases in inventories of both inputs and finished goods have exacerbated the slowdown in growth of new orders and given the loss of momentum in exporting activity, with growing signs that overseas markets are looking to alternative suppliers, the sector needs some degree of clarity on the future relationship with the EU sooner rather than later,” Graeme MacLaughlin said.
Looking at what organic factors and positive stories which are fuelling the increase in manufacturing, Richard Ramsey says the success stories and expansion of firms such as CDE Global and Terex could be among those contributing.
“They seem to be in expansion mode. But they are firms which are more exposed to the US, which is growing strongly. I would imagine those focused on eurozone are maybe experiencing that fall in demand.”
Stephen Kelly, chief executive of Manufacturing NI, told Ulster Business that “in the past year, our firms have been busy”.
“The economic conditions have been right. A purple patch indeed. Admittedly Brexit stockpiling has driven demand for many and as that begins to wash through the system in the coming months (before the next deadline) and with slowing of international and domestic demand, then now is the time to ensure we have the right conditions to ensure that this success is sustained.
“By value, our engineering sector remains our most important. The extraordinary growth of the export focused sector in Mid Ulster, South Derry and West Tyrone contributes huge levels or employment and wages but as labour and skills have become more difficult to secure, firms have begun to spread out. CDE’s investment in Monkstown and Terex’s announcement for the North West demonstrate their commitment to creating more jobs here instead of overseas.
“There has been much speculation about the demise of our manufacturing over recent years but the sector continues to confound its detractors. Employment levels, despite high profile closures, are back to 2009 levels with exports at record levels and orders at home remaining strong. Our sector is larger and more important than manufacturing in the rest of the UK. Through direct and supported jobs, one in four local families rely on a manufacturing wage with our rural economy and community depending on manufacturers to bring both wealth and work.
“Our award-winning food firms feed families at home and abroad with a greater number securing supply contracts with the UKs and Ireland’s largest buyers. Indeed news that Dale Farm had secured a supply contract with Greggs is further evidence that there is more growth possible for this critical sub-sector of manufacturing.
“Often overlooked is our strength in building products. From Specialist Joinery and Carella fitting out the best of corporate offices to Smyth Steel and Macrete making the bulk of the new Tottenham Hotspur stadium, regarded as the best in Europe, in factories here before shipping on barges to London.
“We’re also leading the move in construction from site build to factory built homes, schools, hospitals and offices at the McAvoy Group and Fasthouse. We have even seen a beautiful table made by Terry Design from Portadown in 10 Downing Street.
“Whether it is a critical spring on the Mars rover, or a defibrillator in the Oval office or indeed the fact that one in 10 people on the planet this year benefiting from a Randox test, products made in Northern Ireland are making a difference and making a huge economic contribution.
“It is therefore critical that we cherish and celebrate our great firms who are making great products with great people in every postcode area. We must create the conditions that allow them to be free to make a success of their business and their community.
As for the current and future “disruptor”, Richard Ramsey says while Brexit is the largest, the impact of Trump on the global economy, could have an impact on business here. “The thing is, it’s to what extent (of an impact) there is when there is a trade war. Trump is increasing tariffs on China, then he focuses on the EU – how does the EU retaliate?”
This article was originally published on Ulster Business on June 6th 2019. To see the original please visit here