At our Spring Economic Update event this week, members heard about the latest economic outlook for the UK economy (and a bit about the rest of the world), as well as the industrial picture on the same basis, with an update of our forecasts for the UK machine tool and cutting tool markets.

This is a brief set of notes on the presentations, but you can get more details by downloading the slides from our website 9see below for the link).  At the moment, the macro-economic presentation by Andy Goodwin, Chief UK Economist at Oxford Economics, is only the bare slides  but we will be adding notes to these in the next few days.  Geoff Noon’s presentation on the industrial picture and the updated forecasts already has the notes in the document.


Andy Goodwin began his overview by noting that it has been a challenging 12 months for the UK economy since he last spoke to members.  Interest rates rose more than we had expected and GDP was very weak in the 2nd half of 2023.  However, he considered that we are now seeing a recovery, albeit a fairly modest one, and a return to more “normal” economic times.

One theme of his presentation was the contrast between economic developments in Europe (including the UK) which has been pretty lacklustre while the US economy has sailed along with a reasonable level of growth.  Indeed, if you consider GDP, the EU initially had a recovery from 2021 which has tailed off and been overtaken by the US, while the UK has done little more than bump along at its post-pandemic level.

In the short-term, consumers in the UK are seeing a recovery in spending-power with wage increases now above the rate of inflation, with the latter expected to fall to around the target of 2% very soon.  In turn, this should encourage the bank of England to cut interest rates, with the current feeling being a 50:50 call between the June or the August meetings for the first cut.  Despite this, the impact of previous increases still has further to run in the UK with 5-year fixed term mortgages expiring in the next 12-18 months likely to require a significantly higher rate of interest upon renewal.

There is also a significant fiscal drag, mainly from the freeze on tax allowance thresholds in the UK economy (others also have this to some extent but via different mechanisms) and this will limit the improvement in real incomes.  On the other hand (a well liked phrase by economists!), companies have seen a much higher increase in borrowing costs with most deals in this sector tracking closely to the main Bank Rate rather than being for fixed terms – Covid Recovery Loans, mainly for smaller business are an exception here.

The introduction of permanent Full Capital Expensing, while helpful, is not a game changer.  Most of the impact of temporary allowances comes close to their expiry and this influence is missing with FCE being permanent.

There are a number of risks to the forecasts – indeed, at just 40% probability – the baseline forecasts are at their lowest level of likelihood for some time.  While an upside risk remains from earlier than expected cuts to interest rates, the downside issues include the risk of higher oil prices from the conflict in the Middle East, interest rates staying higher for longer (and this looks more likely than it did even two months ago) and Donald Trump winning the US election and implementing all (or at least most) of his proposed policies (when he won in 2016, he promised these but did not implement many of them).

Finally, for the UK, he noted that the current spending plans for the next financial year (after the General Election) look to be unrealistic;  in part this is because there is no detail behind the overall figures for government spending announced in the budget beyond the current year (2024-25).


In his overview of the industrial scene, he began with the global picture and noted that it looks as though after 2 years of lagging general economic growth, industrial output should start to take the lead in the global economy.  However, the three largest manufacturing blocks – China, Europe and the USA – are out of sync with each other at the moment.

Rising interest rates and increased energy prices have both had significant impact on demand in various parts of the manufacturing sector.  This has generated a mixed outlook in the forecasts for economic activity, whether it is divided by country or industrial sector.  There is also a noticeable difference in the forecasts for manufacturing and the sub-set of investment/capital goods industries.

He then highlighted the baseline assumptions and the key economic risks – full details of these are in the latest documents which you can download (see below for how to do this).  It is noticeable that the upside scenario of interest rates falling sooner than in the baseline assumptions has relatively little (but positive) impact on machine tool demand while the downside scenario of “higher for longer” (which is looking more likely to be the outcome)has a much larger (and negative) impact.

The next section of the presentation briefly highlighted the latest global machine tool forecasts and some of the regional variations in the forecasts over the next couple of years.

Our update of the forecasts made at our Seminar in October 2023 show that the UK machine tool market ended 2023 slightly ahead of expectations and this momentum has led us to move the prediction for 2024 to -3% (from -5%), while the 2025 forecast is increased slightly to +10%.

For cutting tools, 2023 came out quite a bit stronger than we had expected (as did the output data which lies behind the forecast) with growth of +13% being recorded.  Largely because of the base effect of the higher number, we now expect the tooling market to contract by -6% (was -5%) in 2024, before returning to growth of +2% in 2025.

There was then a tour of various elements of data which lie behind these forecasts with the aim of showing how these were derived from both the macro and micro picture.  These included the manufacturing PMI, data on investment by industry and asset type, investment intentions from surveys, capacity utilisation and the output trends for our key industries.

He concluded by looking at industry level data for aerospace (backlogs, production rates and fuel costs, automotive (a recovery in UK production but still well below pre-pandemic levels) and the machinery & metal products industries.


The forecast reports, both for the UK market and globally for machine tools, along with the presentations from our event this week are available to download from – notes that this is in the Members Area of the website and you will need your login and password to access this.  If you are having trouble, let us know (email to Geoff Noon – [email protected]) and we will sort it out for you.

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