Manufacturing recovery gathers pace

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Manufacturing growth in the south west outperformed every other region of Britain over the last three months, according to the latest survey published by EEF, the manufacturers’ organisation, and BDO LLP.

The second quarter EEF/BDO ‘Manufacturing Outlook’ report reveals that the broad based recovery, which began at the end of 2009, has gathered pace, with 71% of the region’s manufacturers increasing total output, notably as a result of strong performance in electronics-related sectors.

Indeed, south west regional output and orders balances hit their highest levels since the survey began in 1995, indicating that manufacturing’s contribution to the recovery looks set to continue over the coming months.

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“Across the region, we are now seeing a broad based strong recovery, which has to be good news for hopes of an export led rebalancing of the economy,” said Clive Turner, head of external affairs for EEF in the south west. “The south west, in particular, is benefiting from very strong recovery in electronics-related sectors. This improvement is starting to translate into a more positive employment trend, although companies remain cautious about the economy and this appears to be inhibiting investment plans.

“They will now be looking to the forthcoming budget to ensure tax and spending plans do not threaten to derail this optimistic picture. Growth has to be a central part of plans to reduce the deficit.”

Jim Brown, Manufacturing expert and partner at BDO, added: “These are a good set of results, especially as the manufacturing sector is still getting to grips with the uncertainty of the new coalition government. Manufacturers are now indicating that they want the Government to deliver in five key areas: deal with the deficit, establish an environment that allows manufacturing to be competitive, provide specific support to mid-market manufacturers and create and support investment in emerging technologies but without forgetting the needs of the traditional manufacturer.”

Headlines for manufacturers in the south west:

• Seven in 10 report increased output.

• UK orders are up for 47%; export orders increase for 67%

• 48% say recruitment is up

• 41% are increasing capital expenditure

• 42% expect growth to continue in the next three months

EEF predicts a 3.5% growth in manufacturing both this year and next as output recovers from the depths of the recession. Engineering output, which fell by 15% in 2009, is expected to grow by 6.4% in 2010. Manufacturing saw similar surges in activity following the 1980s and 1990s recessions.