Bouyant trading conditions overseas have instilled a new confidence in manufacturers for the coming months, according a new survey.
According to the third quarter EEF/BDO ‘Manufacturing Outlook’ report, the recovery that began at the end of last year has continued with output continuing to grow and order balances reaching record levels.
Greater confidence across the sector is also continuing to translate into some recruitment, albeit anecdotally this is being driven by temporary or agency working which will give employers flexibility should demand begin to slow.
Uncertainty about future demand had been dampening investment plans, but a number of sectors are now planning to increase in investment. The positive investment intentions posted this quarter breaks the pattern of previous recessions by recovering at an earlier stage in the cycle.
However, the short-term optimism highlighted by EEF’s survey is shaded with a degree of caution about the risks to growth in 2011. As fiscal consolidation really gets underway in the UK and others follow suit, together with the weaker outlook for the US and risks to the sustainability of Asia’s growth path, the recovery could yet falter.
EEF head of external affairs for the Midlands, Sue Kirby, said: “Manufacturers have continued to reap the rewards of growth in overseas markets with the upswing being felt across all sectors and regions. Not only has this continued to translate into better employment prospects but the recovery in investment has begun much earlier in the cycle than after previous recessions.
“However, we have to maintain perspective that the recovery is coming from a very low base and the risks to the economy in the medium term haven’t gone away. The rebound in exports and modest improvement in investment will need to become much more firmly entrenched if we are to see a much-needed rebalancing of the economy.”
Tom Lawton, head of manufacturing at BDO, added: “The sector has shown seen a significant upturn since the dark days of the recession and this quarter’s results show continued growth in output and orders and more expected for the next quarter, mostly driven by the restocking across most sectors of industry and exports.
“This quarter results show more optimism around two key indicators which have been lagging behind the general good news of the sector in recent surveys, being employment and investment. This is excellent news but much more will be needed to enable manufacturing to compete in the space where we have a competitive advantage - innovation, research and development, excellent customer service and fast response to emerging trends.”