Britain’s manufacturers are recovering more quickly than expected but still face a rocky future, according to a report by financial firm BDO and manufacturing body EEF.
BDO, which has a sizeable Birmingham presence, said manufacturers had outperformed expectations in the first half of 2010 but face the prospect of greater global economic uncertainty and financial market volatility in the rest of this year.
According to the Economic Prospects report from BDO and EEF, manufacturing will grow by 3.8 per cent this year and 3.4 per cent in 2011 outstripping that in the economy as a whole, which is forecast to expand by 1.1 per cent in 2010 and 2.1 per cent in 2011.
The authors put this down mainly to the higher pace of growth in the world as a whole, driven largely by robust economies in the developing world.
However, overall growth for manufacturing will mask sharply diverging performance of individual sectors. Some will enjoy strong growth on the back of weaker sterling and demand from emerging markets, while others will show only moderate prospects for this year and beyond given uncertainty in developed markets.
The report showed that in all sectors there had been a larger percentage increase in exports to the developing BRIC (Brazil, Russia, India, China) economies than developed ones.
EEF’s midlands director Martin Wassell said: “Manufacturing has exceeded expectations so far this year with a broad based recovery based on growth in world trade, a weaker pound and restocking. But with looming spending cuts here and, more uncertainty in key markets, the prospects for different sectors could diverge over the coming year.
“Overall the road to more stable economic conditions is likely to be an uneven one. Policymakers also face a mixed outlook in pursuing the widely accepted need to rebalance our economy as investment looks like it will remain a weak point in the remainder of this year with risks and uncertainty still lingering for both manufacturers and the wider economy. Whilst we have more clarity over the government’s fiscal ambitions, attention is now turning to where the cuts will hit and the difficult balancing act facing the Bank of England and when the MPC will make the next move.”
Tom Lawton, the head of manufacturing at BDO, added: “The better than expected results in the first half of the year have meant that manufacturers have remained buoyant about the economic outlook. However, there is an underlying nervousness within the sector. We still don’t know how the spending cuts announced in the last budget will impact demand for manufactured goods, while a reduction in government support could also hit the UK’s competitiveness in the global marketplace.
“However manufacturers should remain optimistic. Despite the EU economic slowdown, there are fantastic opportunities for growth in other countries like China and India. We welcome the recent UK trade delegation’s visit to India. However if the coalition government is to truly enable international growth in new markets, they must work closely with the banking sector to ensure appropriate financing structures and support is in place to enable businesses take advantage of new export opportunities.”