This is the message from the recent BFM State of Trade, Price Trends and Financial Ratios Survey.
The BFM has just published its June state of trade report and the most striking feature is the number of manufacturers reporting a fall in output over the last 4-months. For this period 45% reported reduced output compared with 14% reporting increased output, a balance of – 31%. This represents the worst industry performance for 8 years and is in stark contrast to the positive output figures reported in the last two surveys. As a result of the fall in output, 16% introduced short time working with 26% making redundancies.
New orders in the period were flat. Looking forwards, as we move through the summer – a traditionally quiet period for many – the expectations are that both orders and output will improve significantly, as well as employment levels.
The survey also looks at prices and price trends and despite foam chemical prices reducing over the last year, there is a strong balance (45%) of manufacturers reporting overall increases in material costs with most categories continuing to show increases.
Labour costs continue to rise with a strong balance (53%) of survey respondents reporting increases in wages. Increases in the National Minimum Wage and the National Living Wage were introduced during the period being surveyed. Wages are also under pressure due to skills shortages and the BFM is actively involved though FIESTA in improving the availability and levels of skilled people in the industry.
The June survey also hosts the annual examination of company financial ratios and a matched sample suggested that there had been a concerted effort to reduce overheads as a means to offset the increased cost of manufacturing.
Results are generally reported as percentage balances, as results from qualitative surveys traditionally are. This is the difference between the percentage of respondents stating 'higher' and those replying 'lower' to questions.
The full comprehensive BFM state of trade report, available to BFM members, is published three times a year and posted in the members area of the BFM website, together with individual sector reports.