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More green shoots emerge (tinged with brown)

01 September, 2003

More green shoots emerge (tinged with brown)

Signs of an export-led improvement in the UK`s manufacturing and engineering sector have been detected in two surveys. A poll of members of the Engineering Employers Federation has revealed that output and orders are expanding for the first time in two years and that the rate of job cuts has slowed.

The second survey, conducted by the Chartered Institute of Purchasing and Supply, has found that manufacturing production and new orders are expanding at the fastest rate for 15 months.

Optimism among the 1,247 companies polled for the EEF survey was slightly above its mid-2002 level. Fewer companies are planning to scale back activities over the coming 12 months than at any time in the past two years. But less than a fifth of them are planning to increase investments, and 30% are still cutting back. Over the past five years, manufacturing investment has shrunk by 40%.

The survey reveals big variations between different parts of industry. While the mechanical equipment sector is growing, the electrical sector is still contracting, with output 25% lower than it was at its peak at the end of 2000.

The EEF cautions that, in the absence of sustained strengthening in global markets, it is still too early to speak of a full recovery. "The upturn is still in a very early phase and many firms are still struggling," reports the EEF`s chief economist Steve Radley (above). "We are still some way off the stage when companies have the confidence to start investing again, and when we can call it a full recovery."

The EEF expects 68,500 job losses in the engineering sector this year, compared to 104,000 in 2002. But output should grow by 0.5% after falling by about 9% last year.

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