UK manufacturers more positive about their prospects

UK manufacturers more positive about their prospects

03-01-2010 15:12

Industrial companies in the UK are more optimistic about their outlook than any time since the start of the financial slump more than 24 months ago, the Engineering Employers Federation (EEF) reported. British orders and output improved better than forecasted since the end of 2009, which was partly caused by stronger demand for British exports, boosted by the weak Sterling. Manufacturing will demonstrate one of the best results of the economy in 2010, as orders and output are expected to grow for the first time since 2008, according to the quarterly ‘Manufacturing Outlook’ report.

Manufacturing firms

9% of the manufacturing firms posted an increase in output in the last three months. Total orders in the manufacturing sector rose, although British demand declined, which was compensated by a strong expansion in export.

Weak Sterling

“British manufacturers seem to perform remarkably in exports and the weak Sterling will hopefully provide support for additional improvements in emerging and advanced markets,” Tom Lawton, head of manufacturing at accountancy firm BDO, said.

Confederation of British Industry

The Confederation of British Industry (CBI) provided a contradictory picture with its latest research on services companies, as they are more positive about their outlooks than three months ago, but they have to deal with increasing costs and are cutting jobs.

Engineering Employers Federation

The Engineering Employers Federation emphasized that several major risks continue to threat this year’s outlook and further. Margins are compressed by downward pressure on prices, which dropped in the United Kingdom and remained unchanged for exports. In the meantime, investment plans continue to be reduced. Business investment dropped by 5.8% in the last quarter of 2009, increasing uncertainty regarding the sustainability of the economic revival.

UK budget deficit

Furthermore, there are still numerous companies that are finding difficulties in increasing credit, according to the Engineering Employers Federation. “The majority of engineering and manufacturing firms will face considerable pressure on working capital,” Lawton commented. Lee Hopley, chief economist at Engineering Employers Federation, stressed the importance of a feasible plan from the government to solve the financial problems of the UK. Hopley stated: “Companies are seeking a credible plan from the government to improve public finances.”
New investment stimulus are not likely as manufacturers need some certainty regarding government plans to solve the British budget gap of €185.12 billion.