The manufacturing industry has proven to be one of the strongest drivers of growth within the UK economy this year, with many firms choosing to expand their operations in order to capitalise on a boom in domestic and overseas demand. Not only has this boosted the revenues and profits of British manufacturing firms, it has elevated levels of confidence to the extent that expectations of annual growth prospects are now at the highest level since before the financial crisis struck.
In a survey conducted by industry body the EEF in April and May, it was found that 34 per cent of the 275 firms questioned expected their output growth to increase during the next quarter. On balance, this is the most positive result since the third quarter of 2007, indicating that the strengthening economy has greatly improved the working situation for firms of all sizes within the manufacturing sector.
Furthermore, the firms participating in the survey predicted a large increase in levels of growth, with the average annual growth forecast at 3.6 per cent. This is a definite step up from the 2.7 per cent annual growth predicted at the beginning of 2014 and, if achieved, will see more and more firms investing in expansion as a means of ensuring customer demand is met.
EEF chief economist Lee Hopley believes that the growth in confidence will prove beneficial both for firms and for the economy as a whole, yet warns against complacency due to uncertain demand from the Eurozone and the United States.
She says; “There is a definite sense of confidence among manufacturers, reflected in a range of recent data releases and the continuing strong positive balance in our latest quarterly survey.
“This should help sustain broad based growth across the UK.
“While we see a lot of activity from companies looking to secure new export business, the still uncertain outlook in some parts of the global economy means a turnaround in export fortunes in the short term is not guaranteed.”
The confidence expressed by manufacturers is by no means a case of “jumping the gun”, as recent data from market analyst Markit showed that output and activity in the manufacturing sector increased for the 15th consecutive month in May. In addition, investment into the sector is now hovering around the record high mark, allowing for a rise in job creation and commercial property acquisition throughout all levels of the supply chain.
In order to allow this momentum to grow, the Government has announced a £100 million scheme which firms can bid for a share in which will allow firms to gain access to research and development support and skills training. This, it claims, will aid growth in the UK supply chain and will encourage major suppliers to “reshore” their operations as a means of strengthening the UK economy.
However, head of manufacturing at BDO, Tom Lawton, believes this investment could be better used to support firms seeking to expand their exports markets.
He says; “What is now needed is a focus on how this success in the UK can be replicated abroad, and we would encourage the Government to introduce more measures to support exports, especially given the tentative nature of economic recovery in Europe.”
