MAGGIE PAGANO: UK manufacturing needs a boost

It is too early to bring out the champagne, but a big slice of British industry is back in business. 

Factory output rose in July at its fastest rate since November 2017, giving fresh hope the economy is moving towards a V-shaped recovery. 

Pollster YouGov’s consumer confidence indicator has also shot up into positive territory for the first time since before the crisis struck. 

Back to work: Factory output rose in July at its fastest rate since November 2017, giving fresh hope the economy is moving towards a V-shaped recovery

But it’s the IHS Markit’s purchasing managers’ index which is the crucial guide to what is happening on the ground. 

The latest figures show that manufacturing activity rose from 50.1 in June to 53.3 in July. Any score above 50 indicates growth, so we now have two months above the neutral line. Admittedly, the bounce back is from a low base as industry was more or less closed down or in deep freeze between March and May. 

Even so, the PMI index shows the sharpest rise in new order volumes since the end of 2018. Business sentiment is also at its highest in 28 months. 

There was further heartening news from across the Channel where manufacturers across Spain, France, Germany and Italy also all recorded growth in July. The average eurozone PMI was 51.8, showing that industry is finding its feet although not at as fast a pace as the UK. Among the brighter spots were energy, chemicals and pharmaceuticals and, despite the hospitality lockdown, the food and drink industry. 

By far the worst sectors hit were the aerospace, automotive and steel industries, which have suffered catastrophic losses because of the pandemic. 

To put the crisis into context, global air traffic is forecast to fall by 45 per cent this year while airlines are likely to lose around £250billion in revenue. 

But there were some interesting trade-offs too. Many factories showed remarkable ingenuity by switching production to the new essentials such as PPE. Yet while the July data is cause for optimism, we are not out of the woods. 

There are still swathes of British manufacturing set to shed tens of thousands of jobs once staff come off their furlough schemes. 

The impact will be felt at every level of industry, and is already hurting the young. 

Apprenticeship starts in May were down 60 per cent compared to the same month last year, while starts for learners aged 16-18 fell by 79 per cent. Industrialists are preparing for the worst, and have learnt from past crises. 

Make UK, the manufacturers’ trade body, was so worried by the 3,000 job losses at Rolls-Royce that it approached the Government to set up a National Skills Task Force to help people retrain. 

Make UK now wants to work with employers and unions to ensure that skills are not lost, while helping those who have lost their jobs to learn new skills. Not surprisingly, one potential boom area is digital technology. Like it or not, Zoom is here to stay. Five-year plans to introduce augmented reality and AI into corporate life have been catapulted into action in five months of lockdown. 

Talks between Make UK and the Government are ongoing about setting up a national task force. It’s an excellent idea, and you have to ask why it is not up and running already. Britain’s manufacturing may be only 10 per cent of the economy but it’s a vital part, accounting for £191billion of output, two thirds of all R&D spending and 2.7m largely well paid jobs. With a little nudge, industry could provide thousands more.

Bond thriller 

Who needs a James Bond movie when you have the story of Petropavlovsk? 

In the hot seat is the co-founder, the swashbuckling gold bug, Peter Hambro, who has returned as chairman to sort out this thriller of a tale. He is at odds with Russian oligarch, Konstantin Strukov. Both want control of gold mines in the far east of Russia. 

The battle is on a knife-edge, and it’s private investors, with about 15 per cent of the shares, who get to decide who comes out the winner at next Monday’s meeting. Strukov’s camp has 38 per cent. Prosperity Capital Management, other institutions and the board have about the same. 

Investors – and I declare an interest with a handful of shares – should back the existing management and vote in favour of motions one to six and against the rest. 

They need to move fast to get their votes in as proxies close this Friday. Hambro was always cut out to be a Bond hero.

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