Industrial output marches on

Posted on 13 Jan 2011 by The Manufacturer

Recent reports of a buoyant UK manufacturing sector at the end of 2010 have been further corroborated by production figures from the Office for National Statistics.

In November, total manufacturing production was 5.6% higher than in the same month in 2009.

Production increased in all manufacturing sub-sectors except chemicals and man-made fibres.

Encouragingly, the best performer was the machinery and equipment industries, up 20%, which suggest manufacturers are now looking to invest in new technology to add capability.

The food, drink and tobacco products industries also fared well, increasing by 8.7%, as did the basic metals and metal products industries, up 11.6%.

Month-on-month, industrial output increased by 0.6%. The transport equipment industries was the main driver of this, with a 3.2% increase.

“Manufacturing continues to build up a head of steam with growth running at almost four per cent for the year as a whole,” said EEF chief economist Lee Hopley. “The sector looks set to drive the right sort of growth and outperform the economy overall but companies will have to navigate a host of potential risks, from uncertainty about prospects in key markets to the impact of looming austerity measures.”

Graeme Allinson, head of manufacturing at Barclays Corporate, warned that despite recent growth, major expansions should not be expected of manufacturing companies this year and that businesses will be seeking to grow organically. He said this may mean UK companies could become prime targets for overseas acquisitions.

Additionally, “most manufacturers see the key threat to their operations this year being rising commodity prices,” he said, “which could eat into margins already squeezed by the recession. The ability to pass on price rises quickly will be crucial for those companies directly at the mercy of fluctuating input prices, something that has already provided an issue for some of our manufacturing clients over the past 18 months when selling goods through large retail chains.”