1. The changing shape of UK manufacturing Filling the gap: the role of business surveys Presentation to ONS Business Statistics User Conference 22 October 2014 Lee Hopley

2. Overview Current trends in manufacturing – what do business surveys bring? Building on what is happening, with why it’s happening Future trends – what are the signs? Limitations and where we’d like some more, please

3. The value of business surveys? Timing, more detail on size, sector or region, plugging data gaps and some thoughts on the actions that sits behind trends.

4. Output and orders edge down, % balance of change in the past three months and % change on a year ago Source: EEF Business Trends Survey and ONS

5. A UK growth story, % balance of change in orders in the past three months Source: EEF Business Trends Survey

6. Employment heads higher too, % balance of change in past three months and % change on a year ago Source: EEF Business Trends Survey and ONS

7. Sector and regional differences apparent, % balance of change in employment in past three months by sector Positive employment balances most like in East, E. Mids and SE over the past year. Employment increases planned in 2014 more likely to be permanent than temporary. Increases expected across all firm sizes. Over half of manufacturers surveyed by EEF were planning to recruit for an apprentice in 2013/14. And pay deals running at between 2.4-2.6% Source: EEF Business Trends Survey

8. Steady prices, squeezed margins, % balance of change in past three months Source: EEF Business Trends Survey

9. A lot of companies planning a little investment, % balance of companies planning investment in year ahead and % balance of change Source: EEF Business Trends Survey and Executive Survey

10. What are the drivers ? % of companies citing driver of increased plant & machinery investment Source: EEF Investment Monitor

11. Business Surveys – The not so useful Short term expectations: forward-looking survey balances less reliable indicators of future trends. Productivity: a pointless answer – output per hour. Companies’ judgements on productivity not always in synch with official definitions. A complete regional picture: coverage is partial and sector surveys should be considered in the round.

12. Current and future trends Manufacturing strategies have been changing and investment priorities will continue to shift. Can we measure them?

13. Intangible investment – getting more important, % of companies planning increase in investment and % citing increased importance of intangibles Source: EEF Investment Monitor

14. Manufacturing coming back – who benefits? % of companies bringing production back to UK from low cost economy Profitability and turnover benefits, some additional jobs of in-house reshoring. Bigger benefits in the supply chain. More scope for job creation and higher proportion of companies securing orders from low cost competitors not increase in profits. But finding suitable UK- suppliers is limiting reshoring possibilities. Source: EEF/GFK Make it Britain Survey 2014

15. New drivers of activity in UK manufacturing, % of companies reporting as influence on UK operations Source: EEF Innovation Monitor

16. Keeping on top of change Understanding how these changes will affect manufacturing and wider economic growth…. A few thoughts: International comparisons eg productivity levels as well as growth. A wider definition than R&D to capture innovation activity. Sectoral employment trends as a further indicator of expansion. International locations of activity by UK businesses.

17. Questions?