Signs of cautious optimism from south west manufacturers

Fifty-eight per cent of South West manufacturers expect to increase sales over the next six months, which is seven per cent up on the last quarter and ten per cent higher than in the same quarter last year, according to the latest South West Barometer from the Manufacturing Advisory Service (MAS).

Manufacturers’ confidence is further reflected in an appetite for investment with 42 per cent of respondents expecting to increase investment in new technology in the next six months, which is an 11 per cent increase on last quarter.

However, this apparent improvement in confidence in prospects is not entirely based on manufacturers’ actual trading performance over the past six months, with just 51 per cent reporting an increase in sales – compared with 53 per cent last quarter. This slight softening in the marketplace indicates that trading conditions have remained challenging.

The number of companies looking to increase staff numbers over the next six months has remained at 33 per cent, no change from the last quarter, while over half of respondents indicated that staff levels would remain the same. Overall, 86 per cent of companies therefore intend to maintain or increase their workforce between now and March 2013.

These employment findings mirror recent results from the English Business Survey, which found workplaces accounting for 67 per cent of employment in England reported no change in employment in July 2012 compared with April 2012. Interestingly however, results from CBI’s latest quarterly SME Trends Survey indicated that employment numbers were rising.

Commenting on the barometer findings, Simon Howes, MAS Area Director for South England, said: “Although the trading environment remains difficult, it is encouraging to see such confidence from manufacturers anticipating an increase in sales turnover.

“While employment intentions remain static, this may be because recruitment decisions are being delayed due to caution over enquiries not converting into orders, flexibility of existing staff or protracted procurement processes.”

Business Minister Michael Fallon said: “It’s encouraging to hear of the optimism amongst manufacturing SMEs in this Barometer. Of course, these are still challenging times, but the recent GDP output is the latest sign yet that the wider economy is starting to recover. We will continue to support manufacturers through MAS to ensure they are best placed to take advantage of opportunities to grow.”

The barometer also aimed to identify the principal barriers to growth for manufacturers in the region and respondents were largely consistent in identifying areas of concern. Leading the list of limiting factors are regulations, cited as the number one inhibitor of growth by 53 per cent of respondents. Shortage of skilled recruits was also identified by 50 per cent of the sample, while material costs were chosen by 46 per cent of manufacturers.

Simon Howes said: “The performance of the region’s manufacturers is crucial to the wellbeing of the economy and it is essential that we understand clearly the barriers that are holding back their progress and address these issues. We will review this survey, carefully fine tuning the MAS service regionally and nationally.”