“Significant risks” ahead despite manufacturing forecast upgrades

Posted on 6 Aug 2013 by The Manufacturer

Manufacturers have upgraded their forecasts for economic growth amid continued optimism on the jobs front, despite significant risks remaining.

The reports by the CBI, manufacturers’ organisation EEF and recruiters Reed stated business activity remains weak, with new orders among small to medium-sized manufacturers continuing to fall in the three months to July, “disappointing” expectations for growth.

Domestic orders were static and exports fell for a fifth consecutive quarter, with output suffering a slight fall, according to the survey undertaken by 390 manufacturers.

Prospects are brighter for the quarter ahead, with output expected to stabilise and new orders set to contract at a slower pace, while investment plans for the coming year were “broadly unchanged.”

Anna Leach, the CBI’s head of economic analysis, said: “Despite another disappointing quarter for small and medium-sized manufacturers, with output continuing to fall, optimism about the general business situation has risen for the first time since spring last year.

“Firms expect demand to improve both at home and abroad and production to stabilise over the next three months. But manufacturers remain concerned about the impact of political and economic conditions overseas on external demand, reflecting ongoing uncertainty about the global economic outlook.”

EEF chief economist Lee Hopley said the findings give reason for optimism.

“With the UK economy beginning to move through the gears and glimmers of hope in the eurozone, this should translate into more broad-based growth for manufacturing in the next few years.

“However, significant risks remain, particularly the continued failure of investment to show signs of life. We are still some way behind the previous peaks and, if we are to benefit from continued research, innovation and export growth, then investment needs to pick up substantially.

“A failure to do so could see a build-up of problems in the supply chain and our competitive position slipping.”