Bailey: Manufacturing recovery ‘precarious’

THE GOVERNMENT needs to do more to deliver on its promise to rebalance the UK economy to benefit manufacturing, according to one of the region’s leading economists.

Professor David Bailey, from Coventry University Business School, said 2010 had been a very good year for Midlands manufacturers compared to 2009, and that while growth will slow next year, manufacturing will still outperform the wider economy. But its recovery could prove fragile if issues such as access to finance and support for exporters are not addressed, he said.

Professor Bailey said: “We have seen manufacturing bounce back, albeit from a very low base. By the end of 2010 around a half of the output fall should have been recovered.  Indeed, in some regions, we’ve seen something of a two-speed economy with manufacturing outperforming the wider economy.

But Professor Bailey called for more support from the Government for small businesses and manufacturing as a whole.

He said: “Despite the rhetoric from the Government of ‘rebalancing’, they have not supported manufacturing as much as they could have done, and I’m still scratching my head wondering whether the new Government actually has an industrial policy that actually adds up to very much.

“In particular, critical areas where manufacturing still needs support are over access for finance – especially for very small firms – the need to better support exports and to diversify our export markets towards the rapidly growing emerging.”

Prof Bailey’s comments came as Birmingham Chamber’s Quarterly Economic Survey showed that the service sector is out-performing manufacturing.

Service industries reported the highest sales and fullest orders books for more than a year, but manufacturers continued to struggle, although overseas orders were strengthening, according to the survey.

Dr Christine Braddock, president of Birmingham Chamber, said: “This survey marks a sea-change in the economic performance of Birmingham and Solihull.

“For years the area has relied on a strong manufacturing sector but the survey confirms that there is a marked change in our economic base.”

Half of the companies responding to the survey were from the marketing and media sector, with 12% from retailing and wholesale and 10% from tourism, hotels and catering and a further 10 per cent from cultural and creative.

The only bright spot among manufacturing firms was in forward orders overseas.

Sales and orders at home were down while sales overseas were largely static with 42% recording an increase. Just under a quarter (24%) said they had decreased. However, 45% reported an increase in export orders.

Figures for jobs in manufacturing were the lowest for over a year with most firms recording static or smaller workforces.

Plans to invest in training and equipment were at their lowest for over a year as was confidence that turnover and profitability would improve.