Manufacturers in the South West have expanded output for six consecutive quarters on the back of export-led demand, it emerged today.
Not only have output and order balances held up well in the past three months but companies have continued to recruit new staff, according to the second quarter 2011 Manufacturing Outlook survey compiled by EEF, the manufacturers’ organisation, and BDO LLP.
The survey adds that alongside positive investment intentions there has been a further gradual improvement in confidence.
Output and new order balances in the South West were +48% and +43% respectively while recruitment intentions remained strong at +35%, backing official data which last month showed a record for manufacturing vacancies.
But while 19% of regional companies increased export prices in the past quarter there are signs emerging that the ability of manufacturers to pass on costs may have peaked.
Regional optimism for the next quarter is less positive, with balances of 17% and 4% of manufacturers expecting output and orders to fall respectively. The survey suggests that this could reflect the South West’s relatively large share of aerospace and defence sectors which are more dependent upon longer term and public sector contracts.
Over the last six months, when the economy as a whole stagnated, manufacturing grew by 2.3%. Since the recovery began, despite only accounting for around 13% of the economy, manufacturing has been responsible for one third of economic growth.
But EEF Region Director Terry Slater, warned: “Recent data appear to indicate that South West manufacturing may be heading for more turbulent times. However, our survey continues to show underlying strength in output and orders and providing buoyant demand from overseas markets holds firm, we should see growth maintained through the rest of the year.”
Jim Brown, a partner at BDO’s Bristol office, added: “On the back of healthy output and order books, the intention to recruit among manufacturers has remained strong, with official data showing record levels of vacancies. However, the key issue is whether companies are able to meet their intentions and fill their vacancies with the highly skilled workers they require.
“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. We are faced with a short term problem that can only be overcome by long-term solutions. 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.”
EEF’s forecast for national manufacturing growth, at 3.2% this year, is down slightly from the previous quarter. Engineering is projected to expand by more than 6%.
