South East manufacturing surges as recovery takes hold – EEF/BDO survey

Output balances for manufacturers across the South East have reached record highs, with companies experiencing a surge in activity as the long awaited recovery takes hold, 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 57% of companies in the South East reported increased output (up from 18% in the last quarter), representing the highest level in 15 years since the survey began.

Orders balances were also better than expected with 31% experiencing an increase; significantly higher than the 15% previously forecasted for Q3 2013.

Companies appear confident that the positive trend will continue into Q4 2013, with a balance of 54% forecasting order books to increase further in the run up to Christmas.

UK-wide, there are also signs that investment performance may finally begin to regain ground lost in the past three years with investment intentions, especially amongst SMEs, escalating sharply to some of the highest levels seen in the survey’s history.

Commenting, Jim Davison, South East 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.”

According to the research, 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.

Kevin Cook, Partner at BDO LLP in the South East, 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. This quarter’s positive news must be used as a strong foundation for continued efforts to ensure the sector gets the support it needs to access capital and develop export markets in order to act as an engine of change for our economy.”

The improved outlook is also translating into better job prospects with a balance of 31% of companies in the South East increasing headcount in Q3 compared to a flat forecast of 0%. A balance of 15% 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%).