Reporting its latest Business Trends Survey, the Engineering Employers Federation (EEF) has added concern over the absence of a turnaround in investment. It also reiterated its plea, ahead of the pre-budget statement, for the Chancellor to avoid imposing any additional cost burdens on manufacturing.
Among other things, the survey found that output and order balances remain positive for a second consecutive quarter; order balances are the best for three years but are still dependent on export orders; and that manufacturing will grow by 1.9% and engineering by 2.4% in 2004.
‘Conditions in manufacturing are improving but not fast enough to call it a recovery. Until our major markets in Europe show more life, it is hard to see much more than a steady improvement for manufacturing,’ said EEF Chief Economist, Steve Radley.
Overall, the fourth quarter saw the second consecutive quarter of positive responses for both output and orders though the balances remain small. More companies reported an increase in orders, with the balance being the most positive since the end of 2000. The increase was driven from abroad with orders from domestic customers remaining weak.
By sector, the increase in output for both motor vehicles and electronics strengthened, with electronics reporting strong increases in both domestic and export orders. Other transport equipment and electrical equipment continue to struggle, however, whilst metal products have not recorded an increase in output for three years.
By region, the North East was one of the strongest regions for the third consecutive quarter in terms of output and orders. Scotland reported a return to growth in Q4, largely driven by the electronics sector, which accounts for a third of Scottish manufacturing output.
An improving world economy will help manufacturing to expand by 1.9% next year and engineering by 2.4%. A stronger upturn will only be possible if European markets pick up, reducing our reliance on the United States and Asian markets.
‘Whilst there are some positive signs of an upturn in the manufacturing sector, a significant fall in capital investment is an unwelcome and worrying trend as, historically, companies coming out of recession and into an upturn, increase capital investment,’ said Bob Hale, chairman of RSM Robson Rhodes National Engineering Group.
‘This clearly isn’t happening this time and, for those manufacturers choosing not to re-invest, they may be unable to take full advantage of any significant upturn when it comes,’ added Hale.
A full copy of the report can be found <A HREF=’http://www.eef.org.uk/Downloads/98979C_Frq42003.pdf’>Here</A>