Manufacturers looking ahead with confidence
MANUFACTURERS in the West Midlands are looking to the future with greater confidence as more companies report signs of improving demand, according to a major survey released today.
The first quarter Manufacturing Outlook report, compiled by EEF, the manufacturers’ organisation and BDO to coincide with the launch of Manufacturing Week today, reveals a larger than expected improvement in output and orders over the past three months.
According to the report, manufacturers in the region are now posting their best results since the beginning of 2008, while predictions for the second quarter show companies being more positive than at any time since the financial crisis began in mid-2007.
Although the results suggest that the first quarter of this year was still tough for manufacturers they posted much improved results compared to the surveys in 2009.
Two-fifths of companies reported an increase in new orders compared to just 5% this time last year. This is set to improve further with over half of all companies predicting an increase in new orders during the second quarter.
Just 18% of West Midlands companies are predicting job losses in the next quarter which is the lowest since the beginning of 2007.
The one negative seems to be that investment plans by companies remains weak. Only 16% of companies in the West Midlands have increased capital expenditure during the first quarter of 2010.
EEF stressed a number of risks remain to manufacturers’ prospects. These include uncertainty about how to repair the public finances, ongoing access to finance issues and the sustainability of recovery in key export markets. Consequently, investment intentions are likely remain muted for some time.
Martin Wassell, EEF Midlands region director, said: “Having emerged from the recession at the end of last year, the start to 2010 was better than expected.
“Clearly more companies are becoming more confident about their prospects and we’re beginning to see the real benefits of an export-led recovery.”
However, he warned people still had to be cautious about predicting a strong rebound, as a number of factors could knock growth off track.
“The recovery depends on world markets continuing to grow, and the financial system’s ability to provide finance is yet to be fully tested. Investment plans are also likely to remain on hold until manufacturers get a better sense of how a new government plans to repair the public finances,” he said.
Tom Lawton, head of manufacturing at BDO, said it was very encouraging to see so many positive indicators.
“However, manufacturers still need to be careful as working capital funding pressures from this growth in activity are applied to already strained balance sheets,” he said.
“In particular, manufacturers should be monitoring the health of all major customers, monitoring and acting if aged debts begin to mount and considering the security of their supply chain.
“But on a positive note UK manufacturers do look to be making impressive gains in exports and it is hoped that the weakness of the pound enables further inroads to be made in both developed and the hugely growing emerging markets.”
The picture in the region mirrors that nationally. The EEF/BDO report shows that Britain’s manufacturers are also looking to the future with greater confidence.
However, EEF stressed a number of risks remained with could dent optimism. These include uncertainty about how to repair the public finances, ongoing access to finance issues and the sustainability of recovery in key export markets.
Key findings were: output and orders turned positive; job losses continued to level off; margins remained under pressure; companies were more optimistic about next quarter; but weak investment remained a concern.
Meanwhile, academics and business leaders from the West Midlands will tonight debate how universities and industry need to work together in order to secure the engineering skills and competencies needed in the year ahead.
The Great Education Debate, organised by the Institution of Mechanical Engineers, has attracted a high-powered panel comprising: Ian Dunn, associate dean, Coventry University, Lord Jones of Birmingham, Dave Wright, head of strategic development at Coventry University and former chief executive of the Manufacturing Advisory Service-West Midlands, Simon Griffiths, the current head of MAS-WM, Stewart Towe, managing director, The Hadley Group, and Bob Joyce, group engineering director, Jaguar Land Rover.
