Happier times?

Manufacturers’ optimism rose in almost half the UK’s regions suggesting the depressed conditions which have plagued manufacturing over the last there years are easing. But new estimates still suggest 36,000 manufacturing jobs will be lost over the next three months. The latest Regional Trends Survey published today by the CBI and Experian Business Strategies shows […]

Manufacturers’ optimism rose in almost half the UK’s regions suggesting the depressed conditions which have plagued manufacturing over the last there years are easing. But new estimates still suggest 36,000 manufacturing jobs will be lost over the next three months.

The latest Regional Trends Survey published today by the CBI and Experian Business Strategies shows optimism was still generally low but rose in five of the UK’s eleven regions. In the previous survey, it fell in all but two and was only just positive in those.

Business optimism was still depressed in several regions but the mood turned firmly positive in Wales, Yorkshire and the Humber, the South West and the North West. The survey also shows a better picture for export prospects with more than half the regions saying they were more optimistic about exports over the year ahead than they were three months ago. Most optimistic were Yorkshire and the Humber, the South West and Wales.

There are other signs of improving conditions in the survey. Every region, apart from Wales and Northern Ireland, saw orders fall over the last quarter but the majority of regions expect total orders to rise over the next three months. Orders are expected to fall in the West Midlands, Scotland, South East and London and East of England.

Seven regions expected output to increase with the biggest increases expected in Northern Ireland, Wales and the North West.

But the improving mood appears to have largely bypassed one region. The West Midlands stands out as deeply pessimistic. Manufacturers there saw optimism fall more sharply than any other region and at the fastest rate since early 2002. Total orders fell at the fastest rate for five years and looking ahead, West Midlands manufacturers also expect falls in total orders, exports and output for the next three months.

Three months ago manufacturers were gloomy in almost every region. There has been an encouraging turnaround in some of the regions though severe difficulties remain and there are some sharp contrasts in outlook, said Doug Godden, CBI Head of Economic Analysis.

‘For example in the South West orders are the least negative for almost two years whereas in the West Midlands they fell at their fastest for almost five years. That may be explained by differences in the make-up of manufacturing in each of the regions. The US recovery is taking off. Companies mainly trading there are in a stronger position than those relying on continental markets.’

Despite recovery appearing to be under way in many regions manufacturers are still under severe pressure. Over the last three months manufacturing jobs continued to be lost in all but one region. Nationally the survey indicates 31,000 manufacturing jobs were shed during the third quarter of this year.

The fastest rate of job cutting was in the South East and London and that is likely to continue. Estimates based on the survey suggest the region will see the sharpest fall in manufacturing jobs over the next quarter.

Employment only rose in the South West and, despite the improvement in mood in many regions, manufacturing employment is expected to go on falling over the next three months in every region apart from the South West. The survey suggests that, across the UK, a further 36,000 jobs will go by the end of the year.

Peter Gutmann, Associate Director of Experian Business Strategies, said: ‘For the first time in well over a year, a majority of regions expect exports to improve. This is consistent with widespread agreement that global recovery is under way. The only doubt concerns the strength of the revival in the eurozone. Subdued growth prospects in this important market for UK exporters probably explains the persistent caution in some regions.’

Demand at home is still weak preventing firms raising prices. Domestic prices fell in every region with the East of England suffering the worst declines. Only manufacturers in Northern Ireland, the South West and North West expect prices to increase over the next three months.

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