In spite of a recent dip in output, the future still looks bright for UK manufacturers. A study just published by the EEF shows that investment intentions amongst companies remain positive, with many pressing ahead with plans to invest in machinery and recruit skilled employees. In fact, investment intentions have now been positive for seventeen consecutive quarters.
The EEF provides manufacturing and engineering support and advice, as well as general business support, to over 6000 manufacturing, engineering and technology businesses. So they clearly know what they’re talking about. For this latest study, they surveyed close to 300 companies.
And while these companies are now seeing some reduction in demand compared to previous quarters, they have plenty to be positive about. Manufacturers are still on course for a strong year of growth in 2014, with most sectors reporting an increase in output this quarter. Motor vehicles and non-metallic minerals proved to be particularly strong performers. Rubber and plastics manufacturers also performed very well, with only the electronics sector reporting falling output.
So what’s the reason for this glitch, after a sustained period of very strong growth? Well, it’s mostly down to the more difficult picture overseas. A flagging Eurozone economy, increasing political risk and a stronger Sterling exchange rate have all contributed to make export orders turn negative for the first time since early 2013. Tom Lawton, Head of Manufacturing at BDO, stated “the UK cannot insulate itself from global market conditions and this is clearly shown in the dip in output”.
But it’s most certainly not all doom and gloom. Lawton went on to add “growth remains positive and long-term investment and employment intentions feel much more realistic at these levels”. Indeed, a balance of +17% of manufacturers still plan to increase capital expenditure over the next year, with a balance of 18% intending to recruit. These recruitment intentions are well above the long-term average.
Lee Hopley, EEF Chief Economist, underlined this positive trend, noting that “manufacturers continue to recruit for skilled jobs and increase their plans to invest in the coming year”. Welcoming this positive trend, she stressed that this is “exactly what the UK economy still needs for balanced growth”.