Manufacturing firms are driving overall economic growth in the UK with strong export orders leading to a sixth-successive quarter of growth for the sector.
The survey of 500 manufacturers also found that firms were hiring despite squeezed profit margins due to rising input costs.
‘Our survey continues to show underlying strength in output and orders,’ said Ms Lee Hopley, chief economist at the Engineering Employers Federation (EEF), who commissioned the report. ‘Providing buoyant demand from overseas markets holds firm, we should see growth maintained through the rest of the year,’ she added.
Over the past six months, when the economy as a whole stagnated, manufacturing grew by 2.3 per cent. Despite only accounting for around 13 per cent of the economy, manufacturing has been responsible for one third of economic growth.
A balance of 28 per cent of manufacturers said they had increased output in the last three months, up from 25 per cent in the EEF’s Q1 survey, published in March. A balance of 30 per cent of firms reported a rise in new orders, up from 20 per cent in Q1.
The survey also found that firms were intending to expand, with 24 per cent looking to take on new workers and a further 18 per cent looking to make other investments.
However, previous improvement in profit margins has gone into reverse in the past three months with a balance of 13 per cent of companies seeing domestic margins deteriorate.
Nevertheless, optimism among companies remains for the next quarter with a balance of 27 per cent of companies expecting output to increase in the next three months.
‘What we are witnessing among our client base is the willingness to recruit — but it’s often very difficult for employers to find people with the adequate skills set to fit the role,’ said Tom Lawton, head of manufacturing at BDO LLP.
‘To ensure the UK retains its competitive edge, the government must do more to emphasise education in engineering and manufacturing to guarantee its future workforce has the appropriate skills to deliver the sector’s needs.’