EEF seek state support for manufacturing sector

Posted on 1 Sep 2008 by The Manufacturer

EEF, the manufacturers’ organisation, has called upon the government to fast-track policies and legislation that would ease the burden on the industry of the challenging current economic climate and enable firms to safeguard jobs.

Having carried out a survey throughout last month jointly with the global business consultancy firm Grant Thornton, EEF concluded that while manufacturing is performing positively as far as output and export orders are concerned, there is growing trepidation among industry insiders about alarmingly three-year low new orders – the ramification of dire domestic demand. Just three areas registered a positive balance on the order books: the North West; South West; and Yorkshire and Humberside.

The survey found that increased prices for both domestic (balance +27 per cent) and exported goods (+18 per cent) have not been able to head-off vastly increased input costs as profit margins declined all the same. As a result investment and employment intentions are barren as firms cautiously tighten the purse-strings. Only London, the South East and Eastern regions will up employment levels over the next three months.

“Manufacturing has shown considerable resilience in the face of a credit crunch, a global economic slowdown and a massive increase in its costs. But there are now clear signs that these pressures are starting to take their toll on companies,” said EEF Chief Economist, Steve Radley.

“Given the Bank of England’s hands remain tied in the short term, it is now essential the government tackles this turning point for the economy head on. It must avoid adding any further costs to business and put in place policies which will provide the building blocks for an upturn,” he added.

In the sub-sector breakdown only ‘electronics’ and ‘other transport equipment’ showed improved trading conditions over the latest quarter. ‘Motor vehicles’, ‘mechanical engineering’, ‘Metals’, ‘metal products’, and ‘electrical engineering’ all suffered declines with the latter two the hardest hit.

Bob Hale, Head of Manufacturing at Grant Thornton said export orders, while not exactly offering rock-solid stability had been the saving grace for a lot of manufacturers.

“UK manufacturing has looked to its export markets for buoyancy this year, but it seems many of the key markets we export to, particularly in Europe, are now coming down with the same malaise afflicting both the US and the UK,” he warned. “However, exporting to emerging markets is still seen as an insulating factor and those UK manufacturers that are able should now be exploring these markets with renewed vigour.”

In supporting Radley’s plea for state-aid, he said: “any respite will now be welcome in what is likely to be a winter of economic discontent.”

A policy strategy report for manufacturing is being drawn up by ministers and is due to be released next week.