North West manufacturers see pick-up in activity despite mounting risks

North West manufacturers have seen their confidence improve and their activity pick-up in the past three months, with strong demand emanating both from at home and abroad, according to a survey published today by EEF, the manufacturers’ organisation and accountancy and business advisory firm BDO.

The output balance rose to a healthy 43% after last quarter’s dip.

Underpinning this activity was a boost in the domestic orders balance (up from 29% to 32%) and more pertinently healthy foreign demand.

Indeed, the export balance is the strongest of any region at 54%, as dominant sectors in the region such as pharmaceuticals enjoy an upturn in activity.

This boost in activity is helping to spur increased employment activity, with the employment balance more than doubling over past three months.

Conversely, the survey points to a fall in investment, which dipped back slightly, but remains healthy – down to 21% from 29% last quarter.

The largely positive trend is reflected nationally, as industry demonstrates its resilience, but risks are mounting.

Looking ahead, confidence about firm level prospects is proving to be more durable than might have been expected, but the threat of escalating trade tensions and heightened concerns about a Brexit outcome that fails to deliver frictionless trade could quickly make trading conditions more difficult.

Moreover, with the recovery in investment intentions unevenly spread across manufacturing sectors, there is caution about the sector closing the productivity gap with competitors.

Central expectations are that manufacturing growth is still on the cards this year and next, but risks to that outlook are increasingly present.

Richard Halstead, EEF director of member engagement for the North, said: “There are both reasons for cheer and caution in our latest survey.

“UK manufacturers in many industries are continuing to benefit from growth in the global economy, expanding their exports and driving ahead with new investments.

“But this is not an industry-wide phenomenon.

“Trade tensions, the Brexit debate reaching a crescendo and some wobbles in confidence about the UK’s economic outlook continue to make their presence felt across a number of manufacturing sectors.

“If these sources of uncertainty prove to be short-lived then growth across manufacturing looks like more of a sure thing next year.

“If not, then government will need to act to prevent investment plans from faltering.”

Graham Ellis, director and head of manufacturing at BDO North West, said: “Despite ongoing uncertainty, manufacturers in the North West continue to demonstrate resilience and confidence in at least the short term future, thanks to buoyant domestic and global demand.

“The Government cannot afford to ignore the importance of UK manufacturing as we endure the twists and turns of EU negotiations and must minimise disruption to the sector by ensuring that Britain remains open for business with the EU as well as other key international markets.”