Those investing online in a stocks and shares ISA or SIPP may want to take a closer look at the UK’s listed manufacturers when assessing share buys for the coming year. A recent report produced by insurers AIG and the EEF manufacturers’ organisation suggests the year ahead could well be rosy for the sector despite the uncertainty surrounding a positive Brexit trade deal being negotiated by Theresa May’s government.
The report says that the British manufacturing sector is experiencing its strongest confidence levels in the global economy, and therefore foreign demand for their goods, since 2004. The combined effect between overall international demand for manufactured goods and a weaker pound making British pricing more competitive is putting a spring in the sector’s step.
Over the course of the UK’s recent history, it has been the services sector that has dominated. However, manufacturing orders figures show that for only the second time in 20 years it is currently the manufacturing sector that is growing the more quickly of the two. UK exports have seen growth of almost 8% since 2015. While the manufacturing sector is much smaller than the services sector in the UK, accounting for only 10% of GDP compared to 80% from services, its positive performance of late is still a big boost.
Manufacturers, and anyone considering buying manufacturing sector shares through online stock brokers, will still be keeping a close eye on EU trade agreement negotiations though! A major part of the recent boost to manufacturers has come from increased and new orders from trading partners from the EU and USA, with both regions currently enjoying strong economic growth. With uncertainty around future trading conditions between the UK and EU, and fears remaining around the possibility of Trump again focusing on the protectionist trade promises of his election platform, neither crucial market is without its future risks.
However, for now, the EEF and AIG report shows that of all the British economy’s sectors, it is manufacturers that are currently enjoying the highest levels of business confidence. As well as investors looking at individual listed manufacturers to buy shares in, another option is ETFs which track the sector as a whole.