Following an impressive end to 2010, manufacturers picked up the growth baton with gusto at the start of 2011, with orders and output now at a record high in the Purchasing Managers’ Index series.
However, inflationary pressures are rising and the performance is yet to turn into any major upturn in employment in the sector, causing Jonathan Lee, chairman of Jonathan Lee Recruitment, to bemoan a “largely jobless recovery”.
Where anything above 50 indicates growth, the headline PMI rating for UK manufacturing in January, taking into account new orders, output, delivery times, employment and inventory, was 62. This was up from a revised figure of 58.7 in December.
A series record high for output followed strong demand from both domestic and overseas markets, which was inspired by new product launches, successful promotional activity and client restocking. Export orders were particularly strong, with high interest UK goods coming in from the US, Scandinavia and Australia.
While the survey found some increases in employment as companies look to work through backlogs, Jonathan Lee says, in reality, these are minimal.
“Unfortunately the improved manufacturing PMI figures have not translated into a large upswing in recruitment in the manufacturing sector,” he said. “Currently, most manufacturers are able to respond to increased demand without recruiting, in large part due to spare capacity built up during the recession.
“As margins have been squeezed, many manufacturers have looked to recruit specialist operations managers who are tasked solely with reducing costs and lead times. The focus is on recruiting people who allow manufacturers to improve their service, as in the short-term, this is the only way they can increase the price they charge.”
He said that a lot of manufacturers are currently in the middle of new product development programmes now that the winter of the downturn has all but thawed and this should mean that firm will be looking to recruit advanced engineers as their projects reach the production stage.
However, they will face competition for the best candidates, especially among the younger generation, he warned.
Input and output prices were up for a majority of manufacturers in January as demand heightened and supplied lead times suffered as well.
David Noble, CEO of CIPS, said: “Manufacturers will be watching intently to see how the Government and Bank of England move to tackle the issue of rising inflation, and hoping for stimulation to encourage continued growth in a sector which is currently leading the way towards UK recovery. A very different picture from last year.”
The survey was conducted by researchers Markit, on behalf of CIPS.