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UK manufacturers raise their growth forecasts

09 June, 2014

Britain’s manufacturers have raised their forecast for growth during 2014 from 2.7% to 3.6% on the back of continued buoyant conditions, according to the latest quarterly survey published by the manufacturers’ organisation, EEF, and the accountancy firm, BDO. This is significantly ahead of the rest of the economy, despite GDP growth being upgraded from 2.6% to 3%.

The Q2 Manufacturing Outlook survey reveals strong trading conditions in all regions and sectors. The positive outlook is being translated into plans to invest and recruit. In particular, recruitment intentions have been positive in all but one quarter since the start of 2010.

However, the one cautious note in the survey is that the growth is being driven mainly by strong domestic demand, with export orders falling short of last quarter’s record expectations. EEF attributes this to a combination of weaker-than-expected growth in the Eurozone and the US, and the appreciation of sterling, but it adds that there is optimism that global opportunities will pick up in the second half of this year.

“There is a definite sense of confidence amongst manufacturers, reflected in a range of recent data releases and the continuing strong positive balances in our latest quarterly survey,” says EEF chief economist, Lee Hopley. “This should help sustain broad-based growth across the UK. Given that manufacturers’ investment plans have been hovering near record highs for several quarters, industry has likely been a significant contributor to the recent recovery in business investment.

“There is, however, some uncertainty about the net trade component of better balanced growth,” she continues. “While we see a lot of activity from companies looking to secure new export business, the still uncertain outlook in some parts of the global economy means a turnaround in exporting fortunes in the short term is not guaranteed.”

The percentage balance of change in investment plans by UK manufacturers reveals that their investment intentions are near record levels
Source: EEF Business Trends Survey

“Now that manufacturers have been freed from the shackles of recession they are proving their importance to the UK economy by leading it out of the downturn, outperforming both the service sector and GDP more generally,” says BDO’s head of manufacturing, Tom Lawton. “The motor vehicle industry is showing particular strength, but the most encouraging aspect of this recovery is that it is so robust in nature with all sub-sectors showing an increase in output.

“Government manufacturing policy is clearly paying dividends and is creating an environment in which manufacturers are comfortable enough to commit to future investment, both in terms of employment and capital,” he adds. “This is a very positive indicator for the rest of the year. What is now needed is a focus on how this success in the UK can be replicated abroad and we would encourage the Government to introduce more supportive measures to support exports, especially given the tentative nature of economic recovery in Europe.”




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