Manufacturing growth slows as concerns grow over weaker exports

September 1, 2014

Growth among West of England manufacturers has eased to more moderate and sustainable long-term levels, according to a new survey published – but exports are being hit by a combination of weakness in the eurozone and sterling’s strength.

The latest quarterly Manufacturing Outlook survey from EEF, the manufacturers’ organisation, and accountants BDO shows a balance of 12% of firms in the sector reporting an increase in orders.

While output levels remained static during the third quarter, the survey pointed to better news on jobs with a balance of 18% expecting to recruit during the next three months and 6% in following quarter.

However, EEF raised concerns over the export market and warned that demand was now more uncertain than since the beginning of last year.

As a result, EEF is now forecasting manufacturing growth of 3.3% by the end of this year, slightly down from the 3.5% it predicted at the end of the last quarter. 

Export orders were turning negative, it said, as the eurozone economy flags significantly, political risks increase and the sterling exchange rate remained high.

John Talbot of BDO’s Bristol office, pictured, said: “Although these figures are more muted than previous quarters, the continuing trend of positive business performance is welcome news to our regional economy and jobs market.

“Manufacturers have successfully ridden out the economic storm of the last seven years so they understand how to effectively balance investment against expectations. There is nervousness surrounding overseas markets, so a strong recovery in exports this year is still uncertain.

“My concern is that companies will use that as an incentive to focus investment on domestic markets, which is not necessarily where long term sustainable growth will lie.”

EEF South West region director Phil Brownsord added: “Growth in manufacturing remains positive but is now understandably returning to more moderate and sustainable levels as the pent-up demand which built up during the recession begins to expire.

“However, there are clearly increasing downside risks overseas which could threaten the pattern of growth going forward. In the face of this, while UK politicians may be focused on next year’s election it is critical that efforts over the rest of this parliament remain focused on sustaining growth across manufacturing and the economy.” 

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