Manufacturing strength grows with UK recovery

Posted on 17 Mar 2014 by Callum Bentley

Indicators approach record highs as exports pick up

Manufacturing body EEF’s latest quarterly survey has revealed Britain’s manufacturers are enjoying increasingly strong growth due to strong UK sales and a healthy boost in overseas trade.

The report, compiled in conjunction with accountancy form BDO, reveals a more consistent picture than in recent quarters with the strong conditions spreading to all regions and sectors, and healthy balances for both UK and overseas sales.

And the positive outlook is being translated into record high recruitment and investment intentions – the highest levels recorded in the survey.

In its report EEF says that translating firms’ intentions to invest and hire more staff into action will be the ultimate test for long term economic recovery.

EEF chief economist, Ms Lee Hopley said: “This is the most positive set of indicators we have seen for some time, demonstrating that we’ve not just turned the corner, we’re actively heading down the right road,” she said. “Manufacturers are clearly feeling more confident as their order books fill up and exports are strong.  It is now vital that Government does all that it can to underpin support for companies, giving manufacturers the confidence to fulfil their investment and recruitment plans.”

Key findings

  • Output and orders firm and in line with expectations for Q1
  • Export balances rebound significantly
  • Output and order balances approaching or at record highs for next three months
  • Indicators on employment and investment intentions reach record highs
  • Manufacturing growth forecast remains at 2.7%, GDP growth upped to 2.6%

According to the survey output and order balances edged higher compared to the final quarter of last year to +22% and +20% respectively. Looking at sector performance the strongest positive balances were reported by companies in the electronics, motor vehicles and electrical equipment sectors.

The trend is forecast to continue in the next quarter with output balances of +29% matching the previous record high in 2004 Q1, while total orders expectations saw a more marked increase to +37%, the highest in the survey’s history.

While the domestic market continues to be a source of strength with a balance of +16%, up slightly from the last quarter, more evidence of a broadening recovery was signalled by a similar balance for exports orders, up substantially from the previous quarter.

Both recruitment and investment intentions have surged. A balance of +31% of companies plan to increase employment in the next three months. The broad based nature of growth was illustrated by the fact all sectors increased employment, with the strongest balances in the motor vehicles and electronics sectors.

Investment intentions also strengthened for a fourth consecutive quarter to +34%, the highest level in the history of the survey.

EEF’s forecast for manufacturing growth in 2014 remains unchanged at 2.7%. However, EEF has increased its forecast for GDP growth to 2.6%.