Prospects for a recovery in engineering in the near future have been dashed by the EEF/RSM Robson Rhodes fourth quarter engineering outlook survey, showing firms reporting falling output in the latest quarter and becoming more pessimistic about the future.
The continued decline reflects the depressed domestic and international conditions, with lower trade volumes in many of the UK’s main export markets, especially the eurozone, affecting engineering companies across the supply chain.
Equally worrying was the forward looking confidence indicators. Optimism has been falling since the second quarter of 2002, as expectations of an improvement continue to be unfulfilled, with the result that it has now turned negative for only the second time in the last three years. Not surprisingly, the outlook for jobs and investment remains negative, making the Treasury’s prediction for growth of business investment of 6.5%-7% look very optimistic.
The EEF’s forecasts for growth in 2003 for engineering (1.1%) and manufacturing (1.2%) are also well below the Treasury’s projection of manufacturing output expanding by 1.75%-2.25%.
The key findings of the report were grim. It said that there were no sign of engineering recovery in final months of 2002, capital investment and jobs were set to decline further and that the decline is now expected to continue into early months of 2003.
Most regions experienced falling output, but some did report better conditions, with output in the north east and eastern areas both increasing, whilst the decline in Scotland was less severe than previous quarters. The West Midlands showed a sharp fall as a result of a decline in motor vehicle production, with confidence in this sector turning round dramatically from a strong positive balance in the third quarter.
Most sectors showed continued falls in output, with the decline in electronics and mechanical equipment reflecting the weakness of manufacturing investment in the UK and overseas. Basic metals recorded the first increase in output in 18 months.
Bob Hale, chairman of the RSM Robson Rhodes’ National Engineering Group said that there is clear evidence that increasing numbers of manufacturers are close to the ‘brink’ with further financial hurdles adding pressures at a time when help is needed.
‘The latest figures make depressing reading, with the problem not just confined to the UK, but to international markets where there has been a marked slowdown. Clearly, with overseas orders falling, this has a major impact on those manufacturers who have developed their export base,’ he said.