The West Midlands is continuing to fly the flag for UK manufacturing despite global economic woes contributing to a difficult time for the sector.
The UK manufacturing growth forecast for the third quarter of 2015 has been halved in the light of economic uncertainty in Europe, particularly Greece, and China but the Midlands is being predicted to continue its healthy growth trajectory.
The strength of the Midlands is highlighted in the latest Manufacturing Outlook survey from EEF, the manufacturers’ organisation, and global law firm DLA Piper.
The report says a ‘rollercoaster of risks’ from the rest of the world has led to a deterioration in all of UK manufacturing’s key indicators and most notably in output and orders, where falling demand at home and abroad is taking its toll.
The balance of manufacturers reporting output growth has dropped to minus two per cent, its lowest level since the final quarter of 2009.
However, in the West Midlands manufacturers are seeing a rosier picture with third quarter output outstripping expectations and 27 per cent of firms seeing an increase.
Expectations for the three months ahead, however, are more muted with seven per cent of the region’s manufacturers expecting output to increase in the final quarter of 2015.
Across the UK, export orders in particular have suffered, edging down again to hit a six year low in response to continued problems in Europe and the slowdown in emerging markets.
But again, West Midlands’ manufacturers have a more positive story to tell. A total of 13 per cent have seen an increase in total orders over the last three months, while a nine per cent predict the same for the next quarter.
Midland manufacturers’ employment intentions are also buoyant. In the third quarter 21 per cent of firms have recruited with 14 per cent expecting to be taking on staff over the next three months.
Investment intentions for the year ahead are also positive and above the UK average.
Looking ahead to 2016, optimism about the wider UK economy’s growth prospects remains stable but manufacturers are feeling less upbeat about their own growth prospects.
Based on the findings, the current economic outlook and recent weaknesses in official data, EEF is halving its manufacturing growth forecast from 1.5 per cent to 0.7 per cent and is adjusting its GDP forecast from 2.6 per cent to 2.5 per cent.
Richard Halstead, Midlands and East region director at EEF, said: “While UK data has continued to point to solid growth, manufacturers - including many from this region - are having to contend with a rollercoaster of risks from the rest of the world. Unfortunately, the white-knuckle ride is in some places starting to take its toll.
“We’ve seen the future of the Eurozone on the line once again, turbulence and uncertainty over China and Greece and, of course, oil and gas are still a concern.
“Against this backdrop it’s no surprise that confidence is faltering and UK manufacturers are feeling less optimistic about their growth prospects for next year.
“However, it’s important to note that confidence has dipped rather than nose-dived and if the global drag lets up anytime soon then UK manufacturing should very swiftly get back into its previous stride.”
Noel Haywood, partner in DLA Piper’s Birmingham office, added: “Despite the headwinds, UK manufacturers are not battening down the hatches yet and, whilst business confidence has certainly dipped, the manufacturing strength in this region will ensure that optimism for the future remains. We remain hopeful that prospects for the sector will pick up again.”