Custom Fittings News & Blog

The UK’s Manufacturing Industry Output Falls

Throughout the EU referendum, it became clear that the UK’s manufacturing industry would be a lightning rod for the after effects of the vote. If we were to stay, we heard, we’d see the industry strengthen amid greater international confidence. If we left, we were told, we’d see an immediate drop in inwards investment and overseas orders.

Whilst we now know that the UK voted to leave, we’re still bracing ourselves for the exact impact that Brexit will have on manufacturing, but it’s clear that in the three months before the vote, it was already having a negative effect on output.

A new study on industrial trends by the CBI has found that manufacturing output in the UK eased back in the three months to July, growing at an even slower rate than in the three months to July and painting a grim picture for the beleaguered industry going into the referendum. It had been mentioned by analysts at the time that the uncertainty that surrounded the referendum would affect overseas orders, and it now appears that that was most certainly the case.

The study of 505 manufacturing firms will come as little surprise to those who pay attention to the market, but will nevertheless illustrate the very real fears that were felt around the world in the build up to the EU referendum.

It’s not all bad news for UK manufacturers, because thanks to the collapse in the value of the pound, buying British made products is cheaper than it has been in a very long time, leading to British exports rising to their highest level in two years during August. The CBI found that whilst overall orders dipped slightly in August, orders from overseas improved to -6, up dramatically from -22 and at their highest levels since August 2014.

Whilst that’s obviously good news for businesses like ours which ships custom fittings like dowty seals around the world, it’s also a double edged sword. Anna Leach, the CBI’s head of economic analysis and surveys explains: "It's good to see manufacturing output growth coming in stronger than expected, and some signs that the fall in sterling is helping to bolster export orders.

"But the pound's weakness is a double-edged sword, as it benefits exporters but also pushes up costs and prices," she added.

Those higher cost and prices have meant that the UK’s manufacturing industry have found the boon in overseas purchases difficult to profit from, and it’s expected that manufacturing growth in August may well be in the negative figures once again as it sheds profits and employees.

Much of the future of the UK’s manufacturing industry will rest on the decisions made by the new Prime Minister and her government, but as we await to see the results of the ongoing negotiations with Europe, it’s clear that manufacturing is going to need help to get back to its feet.

UK Car Manufacturing Industry Hits High Note

Amongst decades of declining success of the British manufacturing industry, there have been a few leading lights which have kept the industry relevant around the world. One such sector has been car manufacturing. The likes of Jaguar, Land Rover, Nissan, Honda, Toyota and Mini have led the charge, but there’s an equal number of world class sports and luxury brands which produce in the UK.

Now, thanks to a survey from the Society of Motor Manufacturers and Traders (SMMT), we know that British Car Manufacturing output hit a 16 year high in the first half of 2016 as more than 900,000 new cars rolled off the production lines at UK factories. That amounts to a 13% leap over the same period in 2015 and was the best performance since 2000 – long before the financial crash.

The rise coincides with the launch of a number of new models of leading cars from the likes of Mini and Land Rover. However, 78% of the cars made in the UK were sold around the globe, with the EU being the largest market for those cars. That casts some doubt on the future of the British car industry, because if free trade can’t be secured, it would be in the better interests of those manufacturers to move their plants elsewhere.

Mike Hawes, the SMMT’s chief executive, said that the outlook for the UK car manufacturing industry, which is an area we supply hydraulic fittings, is uncertain now that we’ve voted to see a future outside of the EU. He said: “The latest increase in production output is the result of investment decisions made over a number of years, well before the referendum was even a prospect.

“These decisions were based on many factors but primarily on tariff-free access to the single market, economic stability and record levels of productivity from a highly skilled workforce. To ensure the sector’s continued growth, and with it the thousands of jobs it supports, these must be priorities in future negotiations.”

The months since the Brexit vote will have meant lower costs for the car manufacturing industry though, thanks to the collapse in the pound meaning that it’s cheaper for customers overseas to purchase cars from the UK. On the other hand, parts sourced from overseas for those cars leapt in price, which might mean reduced overall profits for the industry.

Another potential concern for manufacturers in the UK is that though we may gain access to the free market, we will no longer have a say in shaping the regulations they have to abide by. That, of course, is on top of the fear that the UK could lose highly skilled workers to the EU.

Clearly then, there’s a great deal of uncertainty surrounding the British car manufacturing industry. How that uncertainty is managed, however, is going to become crucial. The new PM and her team are working on a new industrial plan for Britain, we can only wait to see the revolutionary proposals it contains to keep the car manufacturing industry appeased.

EEF Suggest UK Manufacturing Suffers from Lack of Investment

It’s not a secret that the UK’s manufacturing industry has never truly recovered from the financial crash of 2007-08, but opinions on why that might be have been varied. In the past it’s been argued that the financial crash merely hastened what has been a general decline in the size and importance of the UK’s manufacturing industry. However, not everyone shares that view.

Indeed, a new report from respected industry body EEF has said that the UK’s manufacturing industry is suffering from a “hangover” from the days of the credit crunch that has hampered investment in the sector.

In their report that say that whilst most manufacturers are confident in their ability to secure finance, only a third are more likely to borrow now than they were two years ago, revealing a lack of growth prospects within the manufacturing industry. The EEF also revealed that 53% of firms would postpone if cancel their investments of they couldn’t use their own funds.

Manufacturing had grown gradually from 2005 to 2008, but took a huge dive during the financial crisis along with the rest of the economy. It grew slightly between 2010 and 2012, but its growth has been patchy at best since then, and recently hit a three and a half year low as it contracted in July.

The EEF suggest that firms are turning away from traditional bank funding in favour of self-financing investment projects, a trend which could lead to lower investment levels across the sector and stall future growth in a post-Brexit environment.

Lee Hopley, the EEF's chief economist, said: "Manufacturers' reluctance to rely on external finance is a persistent hangover from the credit crunch, where trust and confidence in the banks stalled and never quite recovered.

"But with the Brexit vote dampening investment intentions and adding to uncertainty, this pre-existing condition could now become further aggravated, posing a risk for growth.”

So far in August, we’ve seen massive numbers of overseas purchases of British made products thanks to a weakened pound, but heard of the struggles that many British manufacturing businesses are having thanks to the increased costs of purchasing materials from around the world and decreased bulk and large orders from overseas has decreased. As one of Europe’s leading stainless pipe fitting suppliers, we’re particularly sensitive to changes in the market and we have indeed felt the uncertainty that has rippled through the markets.

BDO LLP have proposed that though business confidence may well be at a three year low, it’s actually better than they might have thought it would be after the Brexit vote. Peter Hemington of BDO said “Brexit has compounded the continuing slowdown of the UK economy, but there is opportunity as well as challenge ahead for UK businesses.

"The Bank of England's decision to lower interest rates is a step in the right direction. We now need a concerted effort from government to lay the foundations for future growth.

"That means taking advantage of cheap borrowing costs to invest in UK infrastructure, encouraging prosperity across the regions and improving productivity."

UK Services Economy Follows Manufacturing Into Negative Territory

Britain’s economy, whilst varied, has long relied on a number of key sectors to keep it functioning for society. With the general decline of manufacturing (which currently accounts for a not inconsiderable 10% of GDP), the services industry has grown to become the UK’s calling card to the world, accounting for a rather astonishing 80% of GDP.

Now, following the news that the UK’s manufacturing economy entered a period of contraction in the month following the Brexit vote, a new study has shown the same effect on the services sector.

The Markit PMI index came in at 52.3 in June, but fell sharply to 47.4 for July. Any number below 50 indicates a contraction in the sector, and over 50 means growth. Although the decline was predicted last month, it nonetheless suggests the fastest pace of decline in the sector since March 2009 – the height of the financial crash.

It means more bad news for the new PM, Theresa May, who will also have been struck by the slowdown in construction output, which PMI pegged at 45.9, which, whilst beating a previous forecast of 44, is still firmly in contraction.

Indeed, though the construction economy is independent of manufacturing, the two have a close relationship thanks to the machinery required in construction. That means a further blow for manufacturing which could manifest in next month’s PMI for manufacturing, as well as in sales for our popular products like dowty seals.

Taken together, the services and construction declines point to a 0.4% quarterly decline in national GDP, though it’s unclear whether these sectors will remain in decline in the coming months. Chris Williamson, chief economist at Markit said: “It’s too early to say if the surveys will remain in such weak territory in coming months, leaving substantial uncertainty over the extent of any potential downturn. However, the unprecedented month-on-month drop in the all-sector index has undoubtedly increased the chances of the UK sliding into at least a mild recession.”

Meanwhile, Theresa May has chaired her first Cabinet Committee on Economy and Industrial Strategy, which is aimed at drawing up an industrial policy for a post-Brexit Britain that works for everybody.

The aim of the committee is to tackle long-term productivity growth, encourage innovation and focus on industries and technologies that will give the UK a competitive edge in the world.

Prior to the meeting, Mrs. May said: "We need a proper industrial strategy that focuses on improving productivity, rewarding hardworking people, with higher wages and creating more opportunities for young people so that, whatever their background, they go as far as their talents will take them. We also need a plan to drive growth up and down the country - from rural areas to our great cities."

The real challenge, however, is rebuilding a manufacturing industry which has been in serious decline for decades, finding policies which support businesses like ours without ignoring the wider global economy.

Three More Ways Britain Could Trade with the World Post-Brexit

Following the June 23^rd referendum which sealed the UK’s future outside of the European Union, much attention has been turned to the subject of trade between the UK and the rest of the world. Without the comfort blanket of free trade with Europe, the UK will soon be adrift in the global market.

For crucial sectors of the economy like manufacturing, which accounts for 10% of GDP, the issue of trade is a huge one. So, how might Britain trade with the rest of the world outside of the EU? In this two part guide, we’ll be surveying the options, so let’s dig in.

• The Norwegian Model

The so-called ‘Norway model’ was a much touted alternative to Britain’s existing relationship to the UK, but does it make any sense?

Norway are a full member of the European Economic Area, which means that have access to the single market, are obliged to make a financial contribution to the EU, accept the majority of their laws and the free movement of people.

As such, people from across the EU are free to live and work in Norway, but Norway are exempt from EU rules on agriculture, fisheries, justice and home affairs. The downside for Norway is that although they are in the single market, they have absolutely no say in how the rules of it are created.

Boris Johnson implied that the UK would continue to have access to the single market without immigration, and that’s a stance that new PM Theresa May has taken too. However, she has been told by EU heavyweights France that there will be no free trade without free movement, which could mean the Norway model is essential.

• The Turkish Model

Another alternative is the model which the Turkish government operate. Turkey are not part of the European Economic Area nor the European Free Trade Association, but it does have a customs union with the EU (along with nations like Andorra and San Marino).

That means that it faces no tariffs, taxes or duties on imports, exports or quotas on industrial goods to sends to EU countries, however, this doesn’t apply to agricultural goods, or services – two areas that the UK is a leader in. With that being said, we certainly wouldn’t mind being able to ship our hydraulic pipe fittings to the EU without a tariff.

Turkey also have no say on the tariffs that they have to impose on goods that they import from non-EU countries, which would put the UK at a significant disadvantage in our quest to open up our free trade to the whole world.

• The Swiss Model

Switzerland are a member of the European Free Trade Association, but no the European Economic Area. That means that they have a free trade agreement with the EU, which has been forged through over 120 bilateral agreements with Brussels, which also guarantee the free movement of people within Switzerland – something we’ve suggested we do not want.

Switzerland does not have full access to the common market for their banking and services sector, which make up almost 80% of the UK’s economy, which means tariffs would apply. Switzerland also give billions of dollars to EU projects to ensure their access to the market.

Join us in part two as we examine 3 more possible models for the UK’s trade in a post-Brexit world.

Trading in the World Post-Brexit

With the UK now examining its trade options in a soon-to-be post-Brexit environment, all eyes are towards Mrs May and her team of negotiators. It’s clear that if Britain’s manufacturing industry is to survive we need to develop a plan for trade with the entire world, and that means Europe too.

In the first part of our guide, we took a look at three of the most commonly touted models that Brexiteers have suggested for the UK going forward. That included the Swiss, Turkish and Norwegian models, all of which present advantages and disadvantages for the UK. So, can any of our other three options present a bright future for the UK’s trade? Let’s find out.

• The Canadian Model

Canada don’t currently have a free trade deal with the EU, although they hope to have one soon – after all, they have been working on one for over 7 years. The Comprehensive Economic and Trade Agreement (Ceta) will give Canada access to the free market, eliminating most tariffs on goods.

However, not everything is covered by Ceta, as foodstuffs and services are left out. Canadian companies hoping to export to the EU will also have to prove that their goods are made entirely in Canada to ensure the European market isn’t flooded with illegal goods.

Most importantly for the UK, banking wouldn’t get the right to “passporting” their services to the EU like they do – a right they value extremely highly. It would also mean that a manufacturing company like us would still have to comply with the full range of EU product standards and requirements for our stainless steel fittings. They will do that, however, without having any say in how those regulations are formed.

• The Singapore/Hong Kong Model.

Many of those who believe in Brexit have said that the UK should adopt a unilateral free trade policy, which would mean dropping all tariffs and relying on the World Trade Organisation’s framework.

It’s an approach that Singapore and Hong Kong employ. In their own words, the Hong Kong government says it “does not charge tariff on importation or exportation of goods” and that “Import and export licensing is kept to a minimum”. It would also mean the UK wouldn’t have to accept free movement, and could trade with the globe.

However, there is a large downside. Because the UK wouldn’t be able to apply any tariffs to imported goods, UK sectors like agriculture and manufacturing would take a huge hit. In these circumstances, it might well be cheaper to purchase food, steel or products from abroad than it would be to make them ourselves – thus potentially crushing several key sectors.

• A Custom Model?

Many in the Brexit camp believe that the UK could yet strike a custom deal with the European Union. Such a deal, in ideal circumstances, would have us trading freely with the European Union, forging our own deals with the rest of the world and would control fully our own borders.

Such a dream, however, seems immensely unlikely. The EU is made up of many nations, lots of whom will have a vested interest in ensuring that the UK do not receive everything they want. From their respective the UK’s trade is important, but also is proving that simply being important doesn’t mean you get eat dinner without paying for it.

The job that Mrs. May and her team of negotiators now have is to forge a path for the UK outside of the European Union. As yet, we have no idea what that means.

Manufacturing Falls at Fastest Rate in Years

Over the course of the Brexit debates, the manufacturing industry became nothing short of a political football. Both sides claimed that manufacturing would be stronger, but as with all things Brexit, it was more ‘wait and see’ than anything concrete.

Results from June indicated that manufacturing was doing just fine, growing in strength and beating analysts’ predictions for growth in the sector. However, those numbers only took into account one week of post-Brexit manufacturing information, and therefore were not much of an accurate indication of what manufacturing in Britain might be like once we’d voted to leave.

Now, Markit have published their monthly survey of the UK’s manufacturing sector and it makes for reasonably gruesome reading for those of us with an interest in the sector. The manufacturing PMI stood at just 48.2, well below the 50 point reading which separates growth from contraction and well below the 49.1 ‘flash’ estimate that they produced on the 22^nd of July.

Those numbers suggest that the UK’s manufacturing activity contracted at its fastest rate since February of 2013 and follows the generally downwards trend witnessed over the last year.

Additionally, their report shows that employment within manufacturing has once again decreased, now hitting 7 straight months of declining numbers. In July, the rate of job losses was the second-fastest for almost three and a half years, Markit have confirmed. According to manufacturers surveyed, this is because of declines in both output and new orders. That’s borne out by a reading of 48.3 in the fresh orders index.

David Noble of CIPS said that manufacturing, which accounts for 10% of the UK’s GDP had taken a step backwards since the Brexit vote, saying: “Though these falls were not as marked as those seen during the Great Recession in 2007-2008 the drop was harsher than expected…Without new orders coming through, this downward trajectory is likely to get worse, at least in the short term.”

There’s also some significant uncertainly regarding the future of Britain’s trade relations with the European Union. The manufacturing sector is heavily reliant on the sales it makes to the European Union and the prospect of drawn out relations with Europe have put a significant damper on confidence.

It’s also led to a weaker pound, which has meant that it’s now cheaper to buy from inside the UK. Anecdotally, here at Custom Fittings we’ve seen increased domestic orders for products like dowty seals since the Brexit vote.

So, what does all this mean for the UK’s manufacturing industry? Well, more than anything else, it means uncertainty. That can affect the industry in a number of ways, but generally it means that investment and spending in the sector will drop off until we can see the light at the end of the tunnel.

UK Manufacturing Continues Recovery in June

The fate and future of Britain’s manufacturing industry has been a topic of much debate over the last few months, but that doesn’t mean the market itself has been questioning its own future. Indeed, a new survey of manufacturers has found that in the month of the EU referendum, the UK’s manufacturing economy grew at a steady clip.

According to the Markit/CIPS purchasing managers’ index, the UK’s manufacturing industry grew during June at its fastest rate in months, rising to 52.1. A reading of 50 indicated stagnation, so anything above that is deemed as growth. This comes just two months after the UK’s manufacturing economy fell into a brief period of contraction, back in April. It’s great news for the UK’s economy going forward, and will surely be a boon to the new Prime Minister, Mrs May.

Economists had predicted growth, but not at the level suggested by Markit’s analysis. The sector makes up around 10% of the UK’s total economic output. However, over Q2, manufacturing is set to show a decline of around 0.5%, following the weak performances found in April and May.

During those fallow months, economists had been warning that uncertainty surrounding the UK’s potential exit of the EU was dampening the manufacturing industry’s ability to perform. However, with June proving that theory somewhat invalid, further questions have to be asked why manufacturing performed so worryingly during that period.

Also of great concern is that though there were higher sales to the US, Europe, Russia and East Asia, the sector posted job losses for its sixth month in a row. That’s a worrying trend, and one which isn’t promising to let up any time soon, especially with negotiations between the UK and EU ongoing, and the future of British exports to the EU in serious doubt.

In regards to the EU, it’s unclear what the referendum vote will actually mean for the future of our manufacturing industry. In the short term, the collapse of pounds value has meant that it’s cheaper for companies around the world to buy from Britain.

However, that also means that it’s more expensive for British companies to source parts from overseas. As such, we’ve seen an increase in domestic orders for products like dowty seals, banjo bolts and banjo fittings over the last couple of months.

In the longer term, the UK’s decision to leave the EU could have major consequences for the manufacturing industry. Over the next three years, the UK will negotiate a new position within the world, one with a huge number of unknowns. That could drive support away from manufacturing in the medium term, and depending on how the negotiations progress, could mean almost anything for the sector.

On the subject of this month’s report, Markit’s senior economist Rob Dobson said: “The latest PMI signalled that manufacturing has started to move out of its early year sluggishness. There were signs that the trend in new export business was starting to pick up.”

How Could Your Business Benefit from Custom Fittings?

Running a manufacturing business is trying, even at the best of times. With Brexit looming and an uncertain future on the cards for the United Kingdom, it’s become ever more crucial to make the right decisions surrounding your business. That might mean negotiating new, longer contracts for your existing clients, moving into new areas of business or cutting your operating expenses. However, we think for manufactures, there’s little better you could do for your business than partner with us at Custom Fittings. But what can a partnership with us deliver for your business?

Bespoke, on demand fittings

It’s in our name for a reason because custom fittings is what we do. Across all manufacturing sectors, our team are able to create aerospace-grade stainless steel fittings. It’s a common fact in manufacturing that engineers will come up against a test where they lack the right adapter to complete a job. You could make the connection by screwing a few random adapters together, or you could work with us and have perfectly machines parts at your door within the week.

Same day dispatch

Aside from our custom fittings, we carry some of the largest stocks of stainless steel hose fittings, tube adapters, dowty seals, banjo bolts and banjo fittings in Europe. Our products span dozens of ranges and are available in hundreds of variants, but best of all, they’re available for dispatch the very day you order them. That means less time spent paying employees for work they can’t complete and therefore, money saved.

Improved supply chain

Anyone who runs a manufacturing business will tell you that it’s all about having the right partnerships. Without a fully functional supply chain your business has a much decreased chance of surviving in this cut throat environment. By partnering with us, your business will have a ready supply of stainless steel hose and pipe fittings that you can always rely on.

Superb customer service

Our customer service team are on hand every day and available via phone, email or our online contact form. What does that mean for your business? Well, it means a dedicated customer service team who are ready to help solve whatever issues your business might come up against.

Expert advice and help

The key to successfully running a business is knowing where your time, expertise and efforts are best placed. Don’t fall in to the trap of picking square pegs for round holes and instead rely on the expertise and professionalism that we at Custom Fittings can offer. Whether it’s advice on the correct termination or thread size or simply a custom design for a hose fitting, our team are ready and willing to help.

Tata Could Keep Port Talbot Steel Plant

After what has been a long, fraught and very public sale process of selling off their UK steel production businesses, the public might well be pleased to see the back of Tata Steel. However, if the latest rumours prove to be true, it could be that Tata keep their Port Talbot plant after all.

Reports suggest that the Indian company is close to a deal with the Government which would mean a stay in the UK, despite the fact that they’re deep into the sales process for their entire UK business, which presently employs around 11,000 people in the UK. They’re currently in talks about a loan worth up to £1 billion and a restructuring of the British Steel pension scheme, which would sale billions of pounds in liabilities for the company. They’re said to have been impressed by the potential package that the Government would offer to businesses who bought the plant, and are now keen to remain.

At the same time, Tata Steel are seeing whether potential bidders would be interested in purchasing two of its divisions – speciality steels and pipeline tube, should they choose to remain in the UK. These two divisions employ roughly 2,500 people at sites in Rotherham, Hartlepool and Stocksbridge, but do not include the Port Talbot plant, where the majority of Tata’s workforce are employed. If the speciality steels business rings a bell, that’s because it’s being investigated by the Serious Fraud Office over allegations of forgery.

A source close to Tata Steel told the Guardian that the company was examining all options, but that nothing had been distracted. However, they did comment that Tata was close to an announcement that they’d keep their UK operations. “They are most likely to keep it”, the source said.

On the government’s end, they’re refraining from sharing an opinion on a potential Tata deal, saying “The government is focused on a long-term future for Port Talbot, which keeps blast furnace steel production in the UK, and we are committed to a credible sales process.

“We have set out our high-level offer on commercial funding and we are working on other areas to reach the best long-term outcome for the industry, workers and the supply chain. That includes ports and infrastructure, power and pensions.”

If Tata were to keep the plant, it would mean a large restructuring of the pension scheme already in place. It’s regarded as a significant hurdle to the rescue deal, with the latest figures showing a deficit of £700m, up from £485m last year. The government’s own estimates put the cost of buying out the plans benefits at £7.5bn.

What exactly happens with Tata’s Port Talbot is still up in the air, with bids lodged by Greybull Capital, who recently bought the Scunthorpe plant and rebranded it as British Steel. Nevertheless, we could be in for another twist in the tale.

Here at Custom Fittings, wish everyone at Port Talbot the very best