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South East: Manufacturing maintains strong growth

6 June 2011
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Finance

Manufacturers in the south east are continuing to help drive UK economic growth on the back of export-led demand, according to the second quarter 2011 Manufacturing Outlook survey published today (June 6) by EEF, the manufacturers’ organisation, and BDO LLP.

The survey shows output and orders balances were as strong as expected in the last quarter, marking the sixth consecutive quarter of growth. And following a jump in the number of vacancies in manufacturing in the official figures, companies across the region continued to recruit over the past three months. Alongside the positive investment intentions, the survey indicates a further gradual improvement in confidence.

Over the last three months, output and new order balances in the South East were +36% and +31% respectively. Recruitment intentions remain strong at +19%, backing official data which showed last month a record for manufacturing vacancies.

However, while a balance of 4% of companies increased export prices in the past three months, the ability of manufacturers to pass on costs may have peaked.

Optimism amongst companies remains positive for the next quarter with a balance of +29% of companies expecting output to increase, while prospects for new orders look positive at +33%.

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.

However, the ability of manufacturers to manage the volatility of input costs is now a greater concern, with signs that fewer companies, particularly in consumer facing sectors, are able to pass on price rises with pressure on profit margins returning.

Commenting, EEF South East Region Director Jim Davison, said:

“Recent data appear to indicate that south east 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.”

Robin Lloyd, Director, BDO LLP, said:

“On the back of healthy output and order books, the intention to recruit amongst 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 over 6%.


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