UK manufacturing sector rebounds in Q4
New analysis shows that the UK’s manufacturing sector has made a dramatic recovery – recording its best performance in more than two and a half years during the final quarter of 2023.
Mid-sized firms have seen their profitability surge thanks to firm demand and stabilising supply chains, according to the latest Manufacturers’ Health Index report, compiled quarterly by inventory management software brand Unleashed.
The report reveals data on GMROI (gross margin return on inventory) – a measure of the profits made on inventory costs – across 16 manufacturing categories and manufacturers were also surveyed to gain first-hand insights into the specific challenges and opportunities they face.
Firms made an average of £2.33 for every pound invested in inventory, up from £1.98 in the previous quarter and £2.05 in the same period of 2022.
All but four of the manufacturing categories analysed saw an uplift in profitability during Q4, with clothing manufacturers, and the energy & chemicals sector storming ahead with £4.53 and £3.30 respectively.
At the other end of the scale, the most dramatic fall was in the plastics and rubber sector, which saw its return on inventory drop to £1.16 from £2.65. Food manufacturing has also stalled at £1.44, while health and medical manufacturing, and the cosmetics & personal care sector were down by 16p and 8p.
| Industry category | Gross Margin Return on Inventory, Q3 2023 | Gross Margin Return on Inventory, Q4 2023 |
| Clothing, Footwear, Accessories | £ 2.85 | £ 4.53 |
| Energy, Chemicals | £ 2.15 | £ 3.30 |
| Furniture, Fixtures, Home Furnishing | £ 2.50 | £ 2.77 |
| Office Equipment and Supplies | £ 1.72 | £ 2.73 |
| Industrial Machinery, Raw Material and Equipment | £ 2.61 | £ 2.72 |
| Electronics, Telecommunication | £ 1.54 | £ 2.69 |
| Electrical and Electronic Components | £ 1.85 | £ 2.68 |
| IT Products and Services | £ 2.18 | £ 2.63 |
| Personal Care | £ 2.64 | £ 2.56 |
| Building and Construction | £ 1.80 | £ 2.51 |
| Health, Medical Supplies and Equipment | £ 2.29 | £ 2.13 |
| Sport, Entertainment, Recreation | £ 1.64 | £ 1.69 |
| Beverages (alcoholic and non-alcoholic) | £ 1.40 | £ 1.51 |
| Automotive and Automotive Supplies | £ 0.94 | £ 1.47 |
| Food | £ 1.44 | £ 1.44 |
| Plastic and Rubber Products | £ 2.65 | £ 1.16 |
Jarrod Adam, head of product at Unleashed, said: “The improvements in GMROI demonstrate how well mid-sized manufacturers in the UK have rallied following the seemingly endless economic and supply chain uncertainty of the past few years.
“In navigating the supply chain and economic challenges they’ve faced, many firms have embraced technology to refine their inventory management processes, enabling them to achieve higher margins on their inventory spend.”
Manufacturers surveyed by Unleashed were optimistic about 2024, with almost three-quarters saying they expect demand to grow this year. However, many are still concerned about high prices, supply chain disruption, and the challenges around attracting and retaining stuff.
Gemma Pearce, managing director and co-founder of Nottinghamshire-based wheelchair manufacturer Loopwheels, said:
“It’s been hard to keep abreast of rising costs, partly in terms of raw materials and components, but more particularly the general cost of living.
“We have a fantastic small team who deserve to be paid well for the work they do. And knowing that everyone’s household bills are rising, I want to keep my team well-rewarded and motivated. We’ve managed to increase pay, but it is a challenge in the current economy to reward your staff well and attract new talent.”
For more information and for the full research, visit: www.unleashedsoftware.com/industry/manufacturing-inventory-management/manufacturinghealthindex.
