Q4 output fall belies strong exports and investment, says Eversheds

Posted on 10 Feb 2012

Industrial output fell for the third consecutive quarter at the end of 2011, it was revealed this week. The UK Index of Production measures the output of all production industries in the UK including manufacturing. But production in December rallied and manufacturing output rallied to rise 1%

Robin Johnson, partner and chair of industrial engineering at international law firm Eversheds, proposes that the picture is not as bleak as it looks.

“Whatever might seem to be implied, the fact remains that in real terms the [quarterly] figures we are seeing simply do not point to a contraction in British manufacturing. Caution yes, managing working capital carefully definitely. However the reality of the situation is that export orders remain strong, companies are investing in innovation and a real desire to address the skills shortage is being felt throughout the industry.

“At a multinational level the Wall Street Journal recently published figures for several industrials, including Caterpillar, Rockwell and even Ford, showing European growth in sales in the last quarter notwithstanding the macro economic gloom. The figures showed that northern Europe has remained relatively immune from the debt issues in southern Europe and that whilst there is caution manufacturing remains positive in most sectors.”

“The December figures show that while there is caution in the market, which is constantly being spooked by macroeconomic issues in Europe, in the real world, with interest rates low and most companies having gone through lean initiatives, business is relatively robust. UK Government spending may be on the decrease as austerity packages remain, but there is still private sector investment as companies spend free cash flow.

Everyone is waiting for the upturn which will come and most companies believe they have survived the worst and are ready for expansion.”