North West manufacturers pause in recovery, but look ahead with optimism

After a substantial post-recession bounce back, manufacturers in the North West have seen a pause in their recovery, according to the latest quarterly Manufacturing Outlook survey by EEF, the manufacturers’ organisation, and accountancy and business advisory firm, BDO LLP.

The data, published today, reveals that after six quarters of significant growth since the beginning of 2013 North West manufacturers have seen a temporary lull in fortunes. However, recruitment and investment intentions continue to hold up, suggesting that firms are simply experiencing a pause and not a stop in their successful fight back to recovery.

Compared to the previous quarter, output fell with, on balance, 22% of manufacturers in the region seeing a drop. At the same time, just 6% on balance saw an increase in total orders. In contrast however, job prospects remained amongst the strongest of any UK region with a net 44% of firms taking on staff in the last quarter.

More importantly, the region’s manufacturers expect to pick up in the second half of the year. On balance, 31% expect to increase output, 24% anticipate a boost in orders and 28% intend to take on staff. The one area of caution is in exports, where the sharp escalation in political risks around the world, a flagging Eurozone and the appreciation of sterling are adding to uncertainty.

Darrell Matthews, North West Region Director at EEF, says: “North West manufacturers are still on course for a strong year, but our survey points to a moderation in the pace of expansion from the take-off in activity over the past year.
“We’re also seeing manufacturers continue to recruit for skilled jobs, which is great news for local people, and increase their plans to invest in the coming year, which is exactly what the region’s economy needs for balanced growth.”

Don Bancroft, partner and head of manufacturing at BDO LLP in the North West, says: “Manufacturers have ridden out the economic storm of the last seven years so they understand how to effectively balance investment against expectations.

“Understandably, there is a nervousness surrounding overseas markets so a strong recovery in exports this year is still uncertain. My concern is that companies will use that as an incentive to focus investment on domestic markets, which is not where long-term sustainable growth will lie.

“While politicians may be absorbed in the build-up to next year’s election, it is critical that efforts remain focused on sustaining growth across manufacturing and the economy.”

Nationally, EEF is continuing to forecast strong manufacturing growth this year at 3.3%, with a return to more normal long-term growth of 2.1% in 2015. Other key findings across the UK are:
• Output and orders balances positive, but down from last quarter
• Domestic market remains the driver of output growth
• Manufacturers expecting stronger export demand, despite past disappointment
• Recruitment and investment intentions ease back, but remain solid.