A survey published today by EEF showed that a marginal outlook improvement is to be expected in the 2013 growth race as UK manufacturers focus on new products and markets.
In 2012 output declined for the first time since 2009, but manufacturers are, on balance, less downbeat about the prospects for the UK and industry in the year ahead.
Commenting on the prospects for this year, EEF chief executive Terry Scuoler said: “The increases in investment in innovation in recent years will bear fruit as companies see opportunities from new product development and the commercialisation of new technology. These efforts will provide a platform for UK exporters to compete in faster growing markets and support efforts to diversify into new global supply chains.”
However, UK manufacturers recognise the potential demand challenges that may lie ahead with eurozone markets expected to offer few opportunities for growth for many. Additionally, the potential for a wider slowdown in the world economy continues to cast a shadow as we enter 2013.
Mt Scuoler continued: “Overall there are reasons to be optimistic that manufacturers are well placed to benefit from a combination of growth in newer markets and demand for higher value goods, which is exactly what our economy needs.”
According to the EEF survey published today, 30% of manufacturing companies are expecting an improvement, compared with 23% anticipating a further deterioration in overall economic conditions in the UK. For conditions in manufacturing, the same proportion of respondents expect a deterioration as forecast an improvement in trading conditions in 2013. Both these balances are an improvement on 2012 when pessimists outnumbered optimists.
The improvement is expected to be driven again by exports, with half of companies expecting export sales to end the year higher than in 2012.
Demand from emerging markets features strongly, with almost half of companies seeing this as important, especially for large firms where the figure climbs to almost two thirds.
Despite the confidence around company level plans, the survey also highlights the risks to growth. Last year, almost 80% of companies cited raw material prices or availability as the biggest risk to growth, with only 10% citing a slowdown in the world economy. This year the figures have almost reversed – two thirds of manufacturers see the biggest risk to growth as a slowdown in the world economy.
In addition, 37% of companies have cited risks from exchange rate volatility, up significantly from last year, and small companies continue to be concerned about their ability to access external finance.