Market News UK subcontractor market stays strong
The UK subcontractor market grew in 2018 and remained steady until the end of the year.
Despite uncertainty for the UK manufacturing industry as a whole, the subcontract and contract manufacturing sector remained strong in 2018 and was up 31% on the previous year, according to the latest Contract Manufacturing Index (CMI) figures.
The CMI for 2018 as a whole was 227, which compares to a figure of 173 for 2017.
Within those headline figures though there was a 7% downward trend through the year – although this eased off in the second half.
The CMI for the fourth quarter of 2018 stood at 222 – up 61% on the equivalent quarter in 2017 and fractionally down (0.45%) on the previous quarter of 2018.
Looking at the fourth quarter figures by process, the subcontract machining market was down 6.4% compared to the previous quarter but 47% higher than the equivalent quarter in 2017. Fabrication was down 4.1% on the previous quarter, but up 67% on what had been a pretty dreadful final quarter of 2017.
Comparing 2018 overall with 2017, machining rose by 16% and fabrication by 39%.
The CMI is produced by sourcing specialist Qimtek and reflects the total purchasing budget for outsourced manufacturing of companies looking to place business in any given month. This represents a sample of over 4,000 companies who could be placing business that together have a purchasing budget of more than £ 3.4bn and a supplier base of over 7,000 companies with a verified turnover in excess of £ 25bn.
The baseline figure of 100 represents the value of the subcontract market in 2014 when the CMI was launched.
Commenting on the figures, Qimtek owner Karl Wigart said: “Once again, the figures underline the critical role that subcontractors play in helping OEMs mitigate uncertain market conditions. Outsourcing production to subcontractors allows them to avoid risky capital investment when future demand is uncertain.
“While Brexit fears may be leading some OEMs to hold off on placing new work, demand for contract manufacturing is up by 18% since the referendum in 2016.
“There are, though, signs that many subcontractors are now running at or near full capacity because they too are putting off capital investment until the market regains its confidence. If this is not resolved there could be an upward pressure on prices.”