Following an encouraging first quarter, the UK subcontract manufacturing market saw a significant decline in the second quarter of 2024. The latest Contract Manufacturing Index (CMI) fell by 28%, dropping from 82 in the previous quarter to 59. This represents a 23% decrease compared to the same period in 2023.
The decline does not appear to be primarily driven by uncertainty surrounding the General Election. However, confidence seemed to rebound towards the end of the quarter, likely due to the anticipated election results.
The index saw a 28% drop from March to April, another 28% drop from April to May when the election was called, but then rebounded by 72% from May to June. By the end of the quarter, the market was only 10% below the average for the first quarter.
Lead times, which have been generally decreasing, stood at 20 days in April and May but extended to 21 days in June.
The CMI, produced by sourcing specialist Qimtek, reflects the total purchasing budget for outsourced manufacturing from companies seeking to place business each month. It is based on a sample of over 4,000 companies with a collective purchasing budget exceeding £3.4 billion and a supplier base of more than 7,000 companies with a verified turnover of over £25 billion. The index baseline of 100 represents the average size of the subcontract manufacturing market between 2014 and 2018.
In the second quarter, machining accounted for 52% of the market, up from 48% in the previous quarter, while fabrication’s share fell from 49% to 38%.
The Industrial Machinery sector remains the largest, holding the top position for the past three years, though it saw a significant decrease, falling by about two-thirds from the last quarter. Analysis by Qimtek indicates that companies in this sector average around 70 employees with an average outsourcing value of £650,000 per year.
The Marine sector surged to become the second largest, growing over tenfold from the previous quarter. The Food & Beverage sector, which placed third, saw a significant decline, while Defence/Military more than doubled to take fourth place.
Construction and electronics experienced the largest declines, likely contributing to the reduced market share for fabrication work.
Qimtek owner Karl Wigart commented, “This was certainly not a very good quarter with a very slow April and May. June picked up with much better activity from buyers and suppliers. However, we are being told again that projects are waiting to be given the go-ahead, partly due to people waiting for the election results.”