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Manufacturing hits fastest growth for seven years

01 March, 2004

Manufacturing hits fastest growth for seven years

Optimistic news about the state of UK manufacturing has come from the Engineering Employers Federation, which says that the sector experienced its strongest growth in seven years during the first quarter of 2004. The EEF expects this growth to strengthen through the rest of 2004 and into 2005, and has revised its growth forecasts upwards, predicting that UK engineering will expand by 3.6% in 2004 and by 4% in 2005, with the corresponding figures for manufacturing being 2.4% and 2.6%.

EEF director general Martin Temple (above) describes the latest survey findings as "excellent news for the manufacturing sector", adding that it "provides grounds for hope that we may be seeing the beginning of a prolonged period of growth".

But, while demand is increasing, the competitive pressures on manufacturing show no signs of abating and the downward pressure on margins is still increasing - which could have a knock-on effect on investment.

"The long downturn in business investment may have come to an end," says Temple, "but, at this stage, in the manufacturing cycle, investment is still conspicuous by its absence."

The stronger growth prospects are being driven from abroad, but the balance on domestic orders has also turned positive for the first time since 1999. The survey, published by the EEF with RSM Robson Rhodes, also reveals that job losses are slowing in all sectors except metals, with employment actually increasing in some sectors and regions.

A second survey, conducted by the CBI and focusing on smaller UK manufacturers, shows that this sector has begun to benefit from the economic recovery, with confidence rising for the first time in almost two years, and a three-year decline in orders and output coming to an end. But the survey also reveals that the economic turnaround has not lifted the fortunes of the smaller firms as much as larger ones.

The CBI`s quarterly survey of 775 manufacturing companies with fewer than 500 employees, reports that orders were flat in the three months to January, halting a decline that started in April 2001. Some 30% of firms saw orders rise during the quarter, while 29% saw them fall.

A seven-year decline in export orders has also come to an end, with export confidence rising for the first time in 18 months. Output was reported as being flat, ending a period of decline that began almost three years ago.

"Smaller companies will be greatly encouraged by these findings," says Hugh Morgan Williams, who chairs the CBI`s SME council. "The three-year slide in orders and output has finally halted, and firms will now be hoping the worst is behind them."

 




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