UK IT manufacturers remain upbeat amid sluggish earnings

Digital map of the UK and Northern Ireland
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UK IT manufacturers saw profitability improve in the fourth quarter of 2023, suggesting an optimistic outlook for the year ahead despite stalling industry growth, new research shows. 

Analysis from software management firm Unleashed found IT products and services manufacturers generated £2.63 for every pound invested in inventory in the last quarter of 2023, up from £2.18 in the same quarter of 2023.

This brought productivity in the sector up to the same level as in the fourth quarter of 2022 - and higher than the industry average of £2.33 across 16 manufacturing categories.

"IT manufacturers held fast towards the end of 2023, with a reassuring, albeit modest, improvement in the final quarter," said Jarrod Adam, head of product at Unleashed.

"Overall, the businesses we surveyed across all 16 manufacturing categories are optimistic about 2024, with almost three-quarters saying they expect demand to grow this year."

The index is based on the gross margin return on inventory (GMROI), a measure of the profits made on inventory costs.

IT manufacturing was the only industry to see profitability staying at the same level as during the fourth quarter of 2022, the study found. Others rose faster, however. 

The electrical and electronic components sector saw much more promising growth compared to the year prior.

Overall, the index showed that the UK’s manufacturing sector has made a dramatic recovery, recording its best performance in more than two and a half years during the final quarter of 2023.

Firms on average made £2.33 for every pound invested in inventory, up from £1.98 the previous quarter and from £2.05 in the same period of 2022.

"The improvements in profitability show how well mid-sized manufacturers in the UK have rallied following the seemingly endless economic and supply chain uncertainty of the past few years," Adam said.

"In navigating the supply chain and economic challenges they’ve faced, many firms have embraced technology to refine their inventory management processes, enabling them to achieve better margins on their inventory spend."

Emma Woollacott

Emma Woollacott is a freelance journalist writing for publications including the BBC, Private Eye, Forbes, Raconteur and specialist technology titles.