Industry optimistic

Posted on 1 Mar 2010 by The Manufacturer

A major survey released by EEF and BDO LLP has shown Britain's manufacturers are more confident as companies report signs of an improvement in demand.

The first quarter ‘Manufacturing Outlook’ report, published at the start of ‘Manufacturing Week’, reveals a larger than expected improvement in output and orders over the past three months and a broad based return of confidence across manufacturing. Companies are consequently the most upbeat since the financial crisis began in mid-2007.

However, EEF stressed a number of risks remain to manufacturers’ prospects. These include uncertainty about how to repair the public finances, ongoing access to finance issues and the sustainability of recovery in key export markets. Consequently, investment intentions are likely to remain muted for some time.

Key findings

• Output and orders turn positive.
• Job losses continue to level off.
• Margins remain under pressure.
• Companies much more optimistic about next quarter.
• But investment set to be last indicator to recover.

According to EEF Chief Economist, Lee Hopley, the economic results from the start of 2010 have proved better than expected. “Clearly more companies are becoming more confident about their prospects and we’re beginning to see the real benefits of an export-led recovery,” he says.

“But we have to be cautious about predicting a strong rebound, as a number of factors could knock growth off track. The recovery depends on world markets continuing to grow, and the financial system’s ability to provide finance is yet to be fully tested. Investment plans are also likely to remain on hold until manufacturers get a better sense of how a new government plans to repair the public finances.”

Tom Lawton, Head of Manufacturing at BDO, said:

“It is great news to see so many positive indicators from the EEF/BDO survey,” says Tom Lawton, Head of Manufacturing at BDO. “However manufacturers still need to be careful as working capital funding pressures from this growth in activity are applied to already strained balance sheets. In particular, manufacturers should be monitoring the health of all major customers, monitoring and acting if aged debts begin to mount and considering the security of their supply chain.”