West manufacturers are continuing to take advantage of growth opportunities in emerging markets and the strength of the aerospace and automotive industries, according to the latest sector survey released today.
However, the continuing problems in the eurozone and a lack of domestic demand are leading to a mixed forecast for the next three months at least.
Results of the second quarter manufacturing outlook survey by the EEF, the manufacturers’ organisation, and business advisers BDO show output and orders remained firmly in positive territory over the past three months at +25 and +31% respectively.
But they are both expected to be more or less flat for the next three months.
There is better news for jobs, with recruitment intentions remaining strong at +44% in the past three months and +27% in the next three. This continues a positive trend on recruitment in manufacturing companies stretching back to the beginning of 2010
Following a sharp contraction in manufacturing output at the end of last year, the sector is forecast to show a small year-on-year contraction for 2012 of -0.1% with GDP growing at just 0.2%.
However, according to EEF forecasts, there will be a recovery in the second half of this year which will gain further momentum through next year. Barring any further shocks, the EEF forecasts a rebound in manufacturing growth next year of 2.2% with GDP growth of 1.8%
EEF regional director Paul Knight said: “Manufacturers are holding steady and displaying the resilience and agility they have displayed in response to a number of unforeseen events in recent years. Despite the problems closer to home they are building on successful strategies to access growth opportunities in new markets.
“However, the main risk to activity is still rooted in the on-going eurozone crisis. While the growing political and economic uncertainty in the region has not significantly dented confidence as yet, it is far from clear what or when the end game might be. This could delay positive investment intentions being translated into a sustained recovery in capital expenditure, at least in the short term.”
BDO manufacturing specialist in Bristol, John Talbot, added: “The results from this latest survey show that UK manufacturing remains surprisingly resilient in the face of the combined headwinds of renewed eurozone uncertainty and a very tight lending market. Exports seem to be holding up reasonably well supported by increasing trade with emerging markets which may well be critical as the eurozone continues its downward spiral. Over the next few years the success of the sector will almost certainly depend on how quickly we can switch our export focus to the emerging growth markets and this will require a shift in thinking amongst many manufacturers.
“The results also show that the economic uncertainty appears to be hitting smaller companies hardest, causing cash flow problems amongst those with the shallowest pockets. Measures to help protect and support these companies must be made a priority or else we face the prospect of losing the type of innovative engineers for which the UK has become globally renowned.”
