UK engineering `will grow by 2.4%` in 2004

Manufacturing will grow by 1.9% in the UK during 2004, and engineering by 2.4%, according to the latest forecast from the EEF, the manufacturers` association. The organisation`s latest quarterly business trends survey paints a mixed picture, with the balance of output and orders remaining positive for a second consecutive quarter, but still no signs of a turnaround in investment.

Some of the survey`s key findings are that:

• the UK`s orders balance is the best for three years, but still depends on exports;

• the downward pressure on prices is easing but there is little sign of relief on margins; and

• the EEF`s member companies remain upbeat about future orders and growth.

"Conditions in manufacturing are improving but not fast enough to call it a recovery," says the EEF`s chief economist, Steve Radley. "Until our major markets in Europe show more life, it is hard to see much more than a steady improvement for manufacturing. While the downward pressure on prices is easing, the increasing costs faced by business mean that margins are not improving.

"Not only is it premature to expect a strong recovery in investment," he continues, "but the continued scaling back of investment plans is extremely worrying for our future competitiveness."

During the fourth quarter of 2003, a growing number of companies reported an increase in orders, with the balance being the most positive since the end of 2000. Once again, the increase was driven from abroad with orders from domestic customers remaining weak.

An improving world economy will help manufacturing to expand by 1.9% during 2004 and engineering by 2.4%. A stronger upturn will be possible only if European markets pick up, says the EEF, reducing the UK`s reliance on the US and Asian markets.

"While there are some positive signs of an upturn in the manufacturing sector," comments Bob Hale, chairman of RSM Robson Rhodes National Engineering Group, "a significant fall in capital investment is an unwelcome and worrying trend as, historically, companies coming out of recession and into an upturn, increase capital investment. This clearly isn`t happening this time and, for those manufacturers choosing not to re-invest, they may be unable to take full advantage of any significant upturn when it comes."