West Midlands manufacturing surges as recovery takes hold – EEF/BDO survey

Manufacturers across the West Midlands are experiencing a surge in activity as the long awaited recovery begins to take hold, with output levels at a three year high, according to a major survey released today by EEF, the manufacturers’ organisation, and accountancy and business advisory firm BDO LLP.

According to the quarterly EEF/BDO Manufacturing Outlook survey, a balance of 51% of companies in the West Midlands reported increased output, up from 21% in the last quarter and the highest for more than three years.

Orders balances were also at a two-and-a-half year high (Q1 2011) with 42% of companies experiencing an increase.

Regional manufacturers appear confident that the positive trend will continue into Q4 2013, with a balance of 38% and 40% forecasting output and orders to increase respectively in the run up to Christmas.

Investment intentions have also increased across the region to 41%, compared to 13% (Q2) and -3% (Q1).

Commenting, Richard Halstead, Midlands Region Director at EEF, the manufacturers’ organisation, said: “Industry’s prospects have brightened considerably in the past few months. There is growing confidence that improving trading conditions will continue into the final months of this year and then accelerate through the gears in 2014.

“However, while the signs of recovery that have emerged so far this year are positive, the need for better balanced growth from net trade and investment remains a necessity. As companies become more confident about their growth prospects, we need to see this translate into commitments to invest in new capacity, and for this to take place in the region.

“Government cannot afford to rest on its laurels at the first signs of positive economic news. We need on-going action to ensure the UK is a competitive location for manufacturers to invest and grow.”

According to the report, the rebound is being led by a stronger domestic market which has often lagged behind exports. But conditions in overseas markets have also picked up with the balance of companies seeing growth in export sales rising to a two-year high in the past quarter.

Tom Lawton, Birmingham-based partner and head of manufacturing at BDO LLP, said: “With a domestic market at its strongest for almost three years, backed by export sales at a two year high, manufacturers across all sectors and throughout the supply chain are feeling the benefits of an impressive return to confidence.

“The positive change in investment intentions is a powerful and important indicator, and key to the future growth and positioning of the sector in the regional, domestic and global markets.

“But let’s reiterate, this is not ‘manufacturing sector – job done’ for the government. We must use it as a strong foundation for continued efforts to ensure the sector gets the support it needs to act as an engine of change for our economy.”

The improved outlook is also translating into better job prospects, with a balance of 34% of companies in the West Midlands increasing headcount in Q3 compared to a forecast of 16%. A further 17% are expected to continue recruiting in the final quarter of the year.

The more positive economic data for manufacturing in recent weeks has caused EEF to upgrade its forecasts for the economy and manufacturing for 2013 and 2014. The economy is forecast to expand by 1.2% (1.1%) this year whilst manufacturing is expected to contract by 0.5% (0.7%). However next year growth is expected to accelerate with the economy growing by 2% (1.8%) and manufacturing by 2.1% (1.9%).