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Manufacturing set for further growth in region

PUBLISHED: 09:43 08 March 2011

The manufacturing sector in the East of England is continuing to grow with the help of strong export-led demand, according to a new survey.

More than nine in 10 of the region’s manufacturers have reported improving or stable export order books over the last three months, according the Manufacturing Outlook report for the first quarter of 2011 from manufacturers’ organisation EEF and accountants and business advisers BDO LLP.

Although UK orders fell back slightly, output and orders are expected to hold up during the second quarter, with EEF predicting 3.5% growth for manufacturing this year.

The survey also reveals positive recruitment intentions, with the balance of companies recruiting in the region standing at 19%.

This reflects optimism among companies for the second quarter, with a balance of 28% of firms expecting output to increase in the next three months and 36% anticipating strengthening order books.

However, following sharp increases in energy and raw material costs, the survey also showed a jump in price pressures, with UK and export price balances higher than the last quarter.

The EEF also stresses that while the overall picture continues to be one of ongoing recovery, the headline results are masking considerable uncertainty. In particular, it says, there is concern over the capital investment which companies need to make in order to boost growth further, with uncertainty over the durability of the recovery and the cost of finance.

The forthcoming Budget will be critical in addressing the issue of translating increased demand into increased investment, it adds.

Jim Davison, EEF regional director for the East of England, said: “Regional manufacturers have generally picked up this year where they left off in 2010, with strong positive balances in output and growing order books in overseas markets.

“However, that rate of growth in output appears to have slowed a little in the last three months – with 19% reporting a worsening of the position – and the picture for the rest of 2011 does remain uncertain.

“Government must recognise that an ongoing recovery cannot now be taken for granted and they must use every club in the bag to sweep away barriers to growth in the Budget,” he added.

Tom Lawton, head of manufacturing at BDO, said: “The data points to price increases among manufacturers, driven in part by underlying movements in the cost of raw materials.

“We are seeing evidence of this among our client base, where some companies have been able to increase prices by significant amounts as they seek to rebuild margins, considerably improving their margins for this year.”

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