East of England manufacturing recovery gathers pace

A GROWING number of manufacturers in the east of England reported buoyant trading conditions over the past three months on the back of rising demand in overseas and UK markets, according to a major survey published by EEF, the manufacturers’ organisation and BDO LLP.

The second quarter EEF/BDO ‘Manufacturing Outlook’ report reveals that the broad based recovery, which began at the end of 2009, has gathered pace. East regional output and orders balances hit their highest levels since the survey began in 1995, indicating that manufacturing’s contribution to the recovery looks set to continue over the coming months.

In the east of England, around six in every 10 of manufacturers saw an increase in both output volume and total new orders. Employment is also returning to growth, albeit more slowly.

“Across the region, we are now seeing a broad based strong recovery, which has to be good news for hopes of an export led rebalancing of the economy,” says Keith Hamilton, Head of External Affairs for EEF in the east of England. “This improvement is starting to translate into an improving employment trend, although companies remain cautious about the economy and this appears to be inhibiting investment plans.

“They will now be looking to the forthcoming budget to ensure tax and spending plans do not threaten to derail this optimistic picture. Growth has to be a central part of plans to reduce the deficit.”

Tom Lawton, Head of Manufacturing at BDO, added: “These are a good set of results, especially as the manufacturing sector is still getting to grips with the uncertainty of the new coalition government. Manufacturers are now indicating that they want the government to deliver in five key areas: deal with the deficit, establish an environment that allows manufacturing to be competitive, provide specific support to mid-market manufacturers and create and support investment in emerging technologies but without forgetting the needs of the traditional manufacturer.

“But, British manufacturers have never waited for, or relied on, politicians and regulators to initiate change. The emerging economies provide a huge opportunity for UK manufacturing. Those businesses who understand their core capabilities and who work hard to nurture them whilst adapting to the rapidly evolving international marketplace could see growth on an unprecedented scale.”

Headlines for manufacturers in the east of England:

  • 56% report increased output
  • UK orders are up for 53% of companies; export orders increase for 60%
  • 21% say employment is rising
  • 21% are increasing capital expenditure
  • 35% expect growth to continue in the next three months, up 3% on the previous quarter

EEF predicts a 3.5% growth in manufacturing both this year and next as output recovers from the depths of the recession. Engineering output, which fell by 15% in 2009, is expected to grow by 6.4% in 2010. Manufacturing saw similar surges in activity following the 1980s and 1990s recessions.