Miranda Dobson

Manufacturers face tough conditions and slash growth expectations

Manufacturers have faced increasingly tough conditions over the past three months, and these conditions are expected to continue into 2013.

EEF manufacturers organisation found that order and output balances were at their lowest level since the end of the 2008/9 recession, and confidence amongst businesses is tentative.

Weakening conditions in the eurozone have taken their toll, according to the survey carried out by EEF and business advisory firm BDO LLP, as the balance for orders fell to +3%, and export order balances dipped into negative numbers for the first time since 2008.

Despite falls in confidence, demand for skilled workers in North East manufacturing businesses is higher than in any other region, as 20% of firms said they increased recruitment in the last quarter, and 24% have plans to recruit in the next quarter.

Mr Tuscher, EEF North East Region Director, urged the Government to “get to grips with growth” ahead of George Osborne’s Autumn Statement, and to put its support behind businesses that want to invest and increase exports.

Orders in the North West are expected to improve by 13% in the first quarter next year, while order predictions are up by 7%.

The North West Region Director for EEF, David Ost, commented: “The weakening of export demand is particularly worrying given the hopes we had placed on trade driving economic growth and rebalancing.

“We need to get businesses investing again and the Autumn Statement should prioritise measures to support business investment through the tax system and to increase competition in business banking.”

In the South West, recruitment intentions are down 5%, after output and cash flow dropped by 21% and 35% respectively.

John Talbot of BDO in Bristol said: “We’ve seen growth ebb away during the course of the year and manufacturers are steeling themselves for a continuation of tough trading conditions in the next few quarters.

“This survey shows that the sector is nowhere near where the government wanted it to be two years ago and emphasises the need for a long term industrial policy focused on manufacturing.”

A similar situation was found in the South East region, with output falls of 32%, while in the West Midlands orders fell by 9%, and output was down 12%.

Across the whole country, BDO and EEF’s extensive survey shows a bleak picture as forecasts for growth were halved from 1.5% to 0.7% for 2013.

Tom Lawton, Head of Manufacturing at BDO LLP, said: “A depressing picture of the UK’s manufacturing sector has been painted in this quarter’s survey, for all but a few sectors and companies.

“The reduction in exports is a particular concern and, whilst this mostly reflects the turmoil in the Eurozone, it also highlights the scale of the challenge in growing exports to emerging markets to offset the downturn in much of Europe.

“On a more positive note, investment intentions seem to be defying gravity but the ongoing issues around access to capital and an unsupportive tax structure may yet have a serious impact on actual investment.

“This survey shows that the sector is nowhere near where the government wanted it to be two years ago and emphasises the need for a long term industrial policy focused on manufacturing.”

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