Subcontracting weathers referendum uncertainty

06 Jul 2016

News posted by Karl Wigart

Contract manufacturing market up 21% in Q2 compared to Q1 and up 72% on Q2 2015

The latest Qimtek Contract Manufacturing Index (CMI) shows that the value of the UK contract and subcontract market rose by 21% in the second quarter (Q2) of 2016 compared to the first quarter (Q1), despite uncertainty in the months leading up to the Brexit vote.

There was still a high degree of volatility in the market. Although the demand for machining stayed relatively steady, both fabrication and other processes (including electronics and plastic moulding) dropped sharply in May, only to recover strongly in June.

The underlying trend was extremely positive, with the index rising from 109 in Q2 2015 to 188 in Q2 2016 – a year-on-year rise of 72%.

The CMI is produced by sourcing specialist Qimtek and reflects the total purchasing budget for outsourced manufacturing of companies looking to place business in any given month. This represents a sample of over 4,000 companies who could be placing business that together have a purchasing budget of more than £3bn and a supplier base of over 7,000 companies with a verified turnover in excess of £25bn. 

The base line figure of 100 represents the average value of the subcontracting market during 2014.

 Looking at the figures by process, machining was 11% up in Q2 2016 compared to Q1 2016 and represented 50% of the total market, compared to 54.5% in the previous quarter. Compared to the comparable quarter in 2015, machining rose by 64%.
Despite a dip in May, fabrication came in 18% up on the previous quarter and 54% up on the previous year. Overall, fabrication accounted for 38% of the market.
The strongest growth, both from Q1 2016 to Q2 2016 and year-on-year was in other processes. They grew from less than 7% of the market a year ago to 12% now.
Commenting on the latest Contract Manufacturing Index figures, Karl Wigart, owner of Qimtek, said: “It is clear that there is a continuing and growing trend towards outsourced manufacturing services. 

“Even in the face of the uncertainty and volatility in the markets, the value of work contracted out continued to rise. This could possibly be down to OEMs hedging against investment in in-house operations in an uncertain market.
“It will be interesting to see if the trend continues now we know the result of the EU referendum.”