BFPA Economic Forecast Seminar 2020

22 Oct 2020

Around 55 delegates from 23 BFPA and BFPDA member companies attended BFPA’s first Economic Forecast Seminar on 7 October which was held via zoom for the first time, due to Covid restrictions. As usual, the aim of the event was for Oxford Economics to provide a global and UK economic update, followed by their latest five-year fluid power industry forecast (for 2020-2024).

Jeremy Leonard, Director of Global Industry Services opened the event with an overview of the main World and UK economic developments in the past year.

The first chart showing GDP confirmed the depressingly obvious fact: that the world is in the grips of a sharp unprecedented “pandemic” recession, brought about by a public health emergency (i.e. governments across the world ordering households and businesses to stop engaging in economic activity, rather than economic imbalances) and as such does not have the traits of the more usual economic recessions. This means that the sectoral mix of the downturn is different and also the recovery will look very different too.

Various government support schemes across the world introduced in April 2020 were discussed, which helped to provide support for businesses and households with the aim of: a) keeping consumers “buying” and b) keeping businesses afloat, but Oxford’s view was that 2021 will be critical year with much depending on the roll out of a successful Covid-19 vaccine in H2 2021. On the assumption that this happens, they predict a “U” shape recovery with the world not fully recovered until 2022, based on the China recovery patterns, which are 3 months ahead.

The historic collapse of GDP in the UK seen in Q2 was one of the worst in the world due to the severity of the UK lockdown. Some sectors were clearly hit much harder than others (with automotive reaching an all-time low in April for example), but although initial recovery was strong for many sectors, investment for CAPEX has been hit and will take time to come back. All this, added to the backdrop of impending Brexit and increased costs due to tariffs and extra administrative / custom burdens, will likely dampen demand into at least Q1 2021.

The second part of Jeremy’s presentation focused on the short- and medium-term prospects for fluid power. BFPA’s monthly survey data for both hydraulics and pneumatics indicated falls in home sales in 2020 with hydraulics suffering more than pneumatics due to the end user sector make up.

Oxford’s forecasts for 2020 up to 2024 were discussed as were the assumptions behind the figures – the timescale of the recovery very much depending on the approval of a successful Covid-19 vaccine in mid-2021. The detail and longer-term forecasts are included in the full report available from the BFPA.

F or more details on how to purchase a copy of the 2020-2024 BFPA Fluid Power Forecast and proceedings from the day, or anything contained in this article please contact Sarah Gardner at sarah@bfpa.co.uk

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