Irish manufacturers upbeat about 2021 prospects despite Covid and new UK trade relations

Manufacturing firms expect to see a recovery in business this year, despite the change in UK trading relations and the ongoing impact of Covid-19.

Irish-based manufacturing firms are confident about their prospects for the next 12 months, despite raw material shortages, supply chain problems, price pressures, and delivery delays.

Despite many challenges remaining, Irish-based manufacturing saw a boost last month with output and new orders rising at the fastest rates since a bounce seen last July after the first Covid-19 lockdown period.

AIB’s monthly index for the sector showed a reading of 57.2 for December. This was up from 52.2 in November. Any reading above 50 marks a sector in growth mode.

"Firms remain optimistic about the 12-month outlook for production, no doubt hopeful that the recent positive news on Covid vaccines will help bring about an improvement in economic conditions over the course of 2021," said AIB’s chief economist, Oliver Mangan.

“Stockpiling ahead of the end of the Brexit transition period was one factor behind the sharp rise in the index, although manufacturing is performing well globally at the present time… so the strong Irish figure is not out of line with elsewhere,” he said. 

New orders received by Irish manufacturers rose for the second month running in December.

Firms reported improving demand and also advance orders placed by customers preparing for potential disruption following the end of the Brexit transition period. Orders related to the European motor industry were also mentioned.

Production followed the same trend as new business inflows, rising for the second month running.

"Not surprisingly, higher work volumes saw firms increase their workforce for the third consecutive month, with employment expanding at its strongest rate since April 2019," said Mr Mangan. 

"Supply chains remain under pressure, with manufacturers reporting shortages in raw materials as well as delays in deliveries owing to congestion at ports and on roads. Price pressures continue to build, with a further sharp increase in input prices in particular," he said.

Manufacturing firms generally expect a recovery in business levels this year, despite the ongoing impact of the pandemic and the new UK trading relationship.