Evidence of two tier economy apparent

THE economy is operating on a two track basis with the service sector buoyant and manufacturers are considerably less upbeat.

That is according to surveys from accountancy firm BDO and the Lloyds Bank PMI report.

BDO’s optimism index, part of its Business Trends Report, remains above its long term trend at 101.9, indicating that businesses expect their order books to continue to grow strongly. However, this is driven by the buoyant services sector, masking serious concerns among manufacturers.  

Manufacturers’ optimism is deep in negative territory at 90.2, showing that manufacturers are gloomy about the future.  In contrast, the services sector is expecting rapid growth, with optimism scores well above the trend at 104.2.

Tim Entwistle, Partner and head of BDO in the North West, said: “These figures show that the UK needs to act now to support our manufacturing industry.  The government must do more to encourage investment and help the sector to grow.

“The government’s plans to encourage a more balanced economy are clearly right, but need to be accompanied by far more action. For instance, incentives to invest and plan for future success should be increased significantly.”

Meanwhile the Lloyds Bank NW PMI showed a mixed picture. Although pivate sector growth picked up in October, it was modest and lower than the UK average.

While new orders contracted for the first time in over two-and-a-half years amid weak domestic demand, employment, on the other hand, increased at the fastest rate since June.