UK Investment, 4th Quarter 2022:  Last week we reported on the manufacturing output and GDP data as these are the monthly series for which the year was completed by the December figures.  The Office for National Statistics (ONS) also published some quarterly series, including the data for investment.  However, rather disappointingly, we are only getting the high-level data for Business Investment and spending by asset type, with the more useful industrial breakdowns currently suspended – we have been promised the return of these towards the end of the year but this leaves a gap in the data that we normally track.

Total business investment has quarter-on-quarter growth of +4.8% in the final quarter of 2022, with an increase of +9.9% for the year as a whole.  Although this is encouraging, there is still a little way to go to get back to the pre-pandemic levels that we saw across the period from 2016 to 2019.

While we don’t have the industry level information, the ONS does publish a high-level breakdown by 5 asset types – dwellings, transport (vehicles), IPP, ICT equipment & other machinery and other buildings & structures & transfer costs.  It is the 4th of these – ICT & Other Machinery (ICT&OM) that is of most interest to us as this is where spending on manufacturing equipment will be classified and because it was the main target of the super-deduction policy.

The data for this category shows a quarter-on-quarter increase of +11.9% and growth in 2022 of +17.6% compared to 2021.  This means that ICT&OM accounted for 31.7% of total business investment last year and the total value of £69.7 billion is the 2nd highest annual figure (behind only 2007) since this data series began in 1997 (it is a chained volume measure, so takes account of price changes).

It is hard to judge whether this is a reflection of the super-deduction policy but it seems a happy coincidence if not.  If, as we expect, super-deduction (which did not cover either buildings or vehicles) is not renewed in the government’s Spring Budget, we may get a clue to this question is spending on this category drops off from Q2-23 onwards.

You can download the ONS Statistical Bulletin and the investment data files from their website at (10 February) or request if from MTA.


UK Foreign Trade, 4th Quarter 2022:  The other important dataset published by the ONS were the trade figures.  In recent years, this has become increasingly distorted by large movements in precious metals and, in particular, non-monetary gold.  Therefore, instead of looking at all trade in goods we are going to focus on the totals excluding precious metals although to save continual re-typing we will refer to this as “goods” in this note.  Another complication is the change in data collection methodology arising from Brexit which has affected the data over the past couple of years and disrupted some time series.

Total exports of “goods” fell by -4.5% in the final quarter of 2022 but this was still +14.6% higher than the final period of 2021.  Indeed, exports have been much higher throughout the year and 2022 as a whole saw “goods” exports grow by +20.8% compared to 2021.  We see a similar pattern for imports of “goods” which fell quarter-on-quarter by -2.1% but were 22.9% higher than a year earlier.  With imports growing by +32.3% for the year as a whole, the UK’s trade deficit in “goods” widened to £253 billion in 2022.

One significant element of this increase in 2022 is the price of commodities and, specifically, gas and oil.  The increase in the value of imports is obvious with the increased price of gas driving up the total but it has also had a part in the growth in value of exports – and in both cases, falling prices at the end of 2022 are the main driver of the lower values of trade recorded in Q4.  The UK is a major importer of gas both by pipeline (mainly from Norway) and in the form of LNG;  through most of last year, the need for mainland European countries to replace Russian pipeline gas with supplies from elsewhere meant tapping into sources of LNG.  Without their own terminals (although these are now coming on stream), a significant chunk of this came into the UK and was then re-exported by pipeline.

This price effect is illustrated by the fact that UK goods imports from the EU increased in the 4th quarter with imports of machinery & transport equipment (led by cars) and chemicals both rising significantly;  in contrast, UK imports from outside the EU fell in the final period of the year and this was entirely accounted for by the reduced value of fuels imports.  Similarly, the fall in UK exports to the EU was led by a reduction in the fuels category although the fall in deliveries to non-EU countries was due to lower exports of materials manufactures.

We have crunched the numbers for the UK’s trade in machine tools and are working on the equivalent figures for other parts of the manufacturing technology spectrum.  Our initial analysis shows that for machine tools, the UK’s exports increased by +4.9% in 2022 (to £563.7 million) with an increase of +12.7% in deliveries to the EU and a fall of -2.0% in exports to the rest of the world;  this was despite growth of +4.7% in shipments to the USA which remains our top export market for machine tools.  As a result, the EU was just a smidgeon short of half of our machine tool exports last year.

UK imports of machine tools increased by +38.5% to £717.9 million, the highest annual total on record, just beating the 1997 figure of £707.1 million.  Arrivals from the EU grew by +72.1%;  given that it is this area which will have been impacted by the changes in methodology, there has to be a suspicion that the methodological changes are at least part of the reason for the massive growth given that imports from outside the EU grew by +12.5%.  This is in contrast to the trend for 2021 which saw growth in imports from outside the EU coupled with no change in the value of arrivals from the EU.

You can download the ONS Statistical Bulletins from their web-site at (10 February) or request them from MTA – contact Geoff Noon (email:  [email protected]) if you would like the analysis of trade in machine tools.


UK Productivity estimate, 4th Quarter 2022:  There are various ways to measure productivity but the preferred method is output per hour worked – the issue is the availability of data on hours worked, so sometimes it is necessary use output per job where the data is more easily available.  However, the UK has good data on hours worked at a detailed level which takes account of short-time or overtime working, so we will focus on that measure in this note.

For the whole economy, there was an improvement of +0.3% in output per hour worked compared to the previous quarter but it was -0.1% lower than a year earlier.  Perhaps the more telling statistic given the distortions of the Covid pandemic, is that the latest figure is +1.9% higher than the average for 2019.  The main driver of all of these trends was mainly a fall in the number of hours worked with a smaller contribution from a modest increase in output (measured by gross value added – GVA).

The ONS also publishes productivity data for manufacturing and, within that, the major industry groups.  For manufacturing, there is a very different picture of productivity with output per hour worked falling in the 4th quarter of 2022 by -1.3% compared to the previous quarter and -5.0% on a year earlier.  In this case, this was driven by an increase in the hours worked accompanied by either flat or falling output.  However, the comparison with the pre-pandemic picture (the 2019 average) is more positive with productivity increasing by +7.8% thanks to an increase in GVA and a fall in hours worked.

There is a mixed picture at the industry level – to avoid data overload, we will just focus on the comparison with the pre-pandemic level of output per hour worked.  This fell by -7.0% for the transport equipment group (automotive, aerospace, etc.) where GVA fell more sharply than hours worked.  In contrast, there was an improvement of +4.5% for the basic metals & metal products group mainly due in this case to an increase in output with hours worked broadly unchanged.  Finally, the machinery industry managed a spectacular improvement of +35.3% in productivity thanks to a combination of a large increase in GVA and a significant fall in hours worked.

You can access the ONS bulletin and data files from their website at (14 February) or request them from MTA.

To top