Confidence levels in manufacturing show sharp increase

Posted on 2 Nov 2009 by The Manufacturer

Confidence levels in the manufacturing sector jumped in the third quarter, according to new research by accountants and business advisers BDO LLP.

In a survey covering Aerospace & Defence; Food Manufacturing and Distribution; Automotive; Engineering; and Technology, Building Materials, Chemicals and Pharmaceuticals across the UK, 49.5% of respondents in Q3 were confident about the outlook for their business over the next six months, a sharp rise from Q2, when 37.3% said they were confident. Thirty-seven per cent of respondents said their confidence levels were unchanged, while just 13.3% said they were negative about the next six months.

Those that do feel gloomy about the prospects for their business over the next six months are largely engineering and technology/electronics businesses — which have been hard hit by the downturn in the automotive and consumer electronics industries. However, two thirds of these businesses intend to invest between one and five per cent of turnover in research and development (R&D), indicating expectations of an upturn in 2010.

Tom Lawton, Head of Manufacturing at BDO Stoy Hayward says: “Although conditions for manufacturers across most sub-sectors remain challenging, confidence levels have seen a significant increase since the last quarter. Our findings show that nearly half are now more confident about the next six months, a clear indicator that they believe a real economic recovery is not far off.”

“Recovery in the sector will probably be a slow process. However, hopes are high that the sector has turned a corner and we are now seeing more consolidation as opposed to contraction, which is further borne out by the recent announcement that Gross Domestic Product (GDP) decreased by 0.4 per cent in the third quarter of 2009, compared with a 0.6 per cent decrease seen in the second quarter.”