UK manufacturing looks set to benefit from growth in global economy

Britain’s manufacturers have continued where they left off in the first quarter of 2006, with output increasing in the second quarter and looking better than at any time in the last ten years.

The second quarter 2006 engineering outlook survey, carried out by EEF and RSM Robson Rhodes, suggests that the strong growth across the global economy, including the recent pick up in Europe, is the main driver of growth for UK companies.

The EEF is a well-respected membership organisation serving the needs of manufacturers across the UK. EEF, the manufacturers' organisation, has a membership of 6,000 manufacturing, engineering and technology-based businesses and represents the interests of manufacturing at all levels of government.

Comprising 11 regional Associations, the Engineering Construction Industries Association (ECIA) and UK Steel, EEF is one of the UK's leading providers of business services in employment relations and employment law, health, safety and environment, manufacturing performance, and education and skills.

RSM Robson Rhodes is an equally well-respected national firm of chartered accountants and consultants providing a full range of business services to the UK private and public sectors.

Bob Hale, chairman of RSM Robson Rhodes’ National Manufacturing and Technology Group, commented: “It is heartening to see that the sector seems to have turned the corner and pessimism has been replaced by optimism.

“Domestic orders whilst up over the past three months, lagged behind exports which saw increased business with Europe, mainly because of a reviving German economy. An upturn in output and orders is anticipated over the next quarter.

“More companies are planning to invest over the coming 12 months – a clear sign of increased optimism in the sector going forward. However, downward pressures on margins remain with most sectors still experiencing cost increases which cannot be reflected in increased selling prices.”

The West Midlands is unfortunately lagging behind the rest of the UK economy in terms of reporting negative change in output and minimal growth in orders over the last three months. “This is principally because of a poor showing by the metal products and automotive industries within the region,” says Hale.

“Conditions remain tough in these sectors and the recent demise of Eliza Tinsley demonstrates this. However, there is still a raft of very successful businesses within the regional economy including major players such as Rolls Royce, IMI and GKN, as well as many smaller players such as Castings, Hill & Smith, Hadley Industries, Hampson Industries and Wagon.”

In contrast, the South East, South West and East Midlands regions have shown a very good growth rate – primarily because of buoyant aerospace and electronics industries.

Concludes Hale: “Those Midlands’ manufacturers that have re-engineered themselves - through a combination of lean manufacturing techniques and embracing technology - should continue to prosper within the global marketplace. One of the key factors in maintaining a healthy business is commitment to R&D and ongoing investment throughout the company.”

Commenting on the survey, EEF chief economist, Steve Radley, said: “Our survey shows that manufacturers are making the most of a strong global economy, with exports, investment and employment all expanding. However, the domestic market remains subdued, suggesting that the UK’s Monetary Policy Committee should hold off from raising interest rates.”

In summary then, the key results include: output indicators at highest levels for ten years; strong world economy supports growth; some improvement in margins; investment plans holding up; employment prospects more positive as job cuts ease; and growth forecasts to the fourth quarter of 2006 in engineering and manufacturing revised up to 3.8 per cent and 1.8 per cent respectively.

As I said in a previous article, UK manufacturing may be on the ropes but is certainly not down!


Copyright: John Hicks, Headline Promotions, Press & PR
You can see John’s marketing & PR blog at www.headlinepromotions.blogspot.com
Photo courtesy of Metaltech Precision Engineers Ltd.

This article was first published by The American Chronicle series in June 2006.