Northern England leads the way

Northern England led a pick-up in new orders and output in UK manufacturing in the three months to January according to the latest Regional Trends Survey.

According to the survey, which was published today by CBI and Experian, the rise at a UK level in new manufacturing orders over the past three months was the strongest since the spring of 2004. Two regions, the North East and the North West, stand out as posting the sharpest gains among all regions, and in the case of the North West the upturn was the steepest since 1995. Expectations of new orders for the next three months are very positive in the North East, driven by an extremely buoyant export order outlook.

It was a similar pattern for factory output. The UK rise - the most marked since 1995 - was led by the North West, with the North East also faring well. Another northern region, Yorkshire & the Humber, also recorded a pick-up in output well above the national average.

The marked output gain at the UK level was not shared by all regions, however. Wales, Northern Ireland and Scotland all reported falling output, and there was only a small rise in the West Midlands, continuing the region’s weak performance even relative to the subdued overall UK picture of recent years. While the West Midlands foresees little change in output in the next three months, Western parts of the UK are more upbeat, with Wales in particular expecting a strong increase.

The weakness of past and expected output in the West Midlands is reflected in another steep fall in overall business confidence in the region, much sharper than the modest decline at the national level. Several regions have become more optimistic given the encouraging domestic and international backdrop. The regions that are more upbeat than three months ago are Northern Ireland, the East Midlands and the North West.

Against an improving background, manufacturers were able to increase factory-gate prices at a stronger pace than in recent years. The sharpest rise in domestic prices was recorded by Northern Ireland followed by Yorkshire & the Humber, which also posted a healthy gain in export prices, exceeded only by the North West. But price falls, both domestic and export, were reported by Wales and the North East.

Despite the gains in output and orders, manufacturing employment fell at its fastest rate for nine months. Three regions - Northern Ireland, the West Midlands and the South East & London - have consistently lost jobs faster than the national average rate. But there were very sharp falls even by these regions’ standards. Looking forward, the West Midlands and Northern Ireland remain much more pessimistic about employment than the rest of the UK, but the South East & London is at least or more upbeat than at any time since 2004.

A further significant feature of the employment figures was that the two best performing northern regions in terms of new orders and output bucked the national trend of continuing employment decline. The North West reported a strong rise in employment, the third gain in the past nine months, while the North East saw a marginal increase.

According to Experian estimates based on the survey results, a further 30,000 jobs will be lost to manufacturing in the current quarter, a larger figure than in recent times, though still well short of the losses seen during the sector's steep recession of 2001 to 2003. The magnitude of the fall largely reflects further sharp contraction in two regions that have borne the brunt of recent job losses. The West Midlands is forecast to see the largest absolute fall with 9,000 jobs lost and the sharpest decrease in percentage terms (2.5 per cent) followed by the South East & London with 7,000 job losses.

Peter Gutmann of Experian said: ‘The survey results confirm an encouraging trend in UK manufacturing orders and output, but highlight an uneven regional performance in recent months. Output and employment have seen wide regional divergence, typical of an uncertain and fragile recovery. However, regional expectations suggest that in the coming months we will see a more broadly based upturn. The healthy domestic economy and the resilience of the eurozone suggest that these forecasts are realistic, despite sterling’s recent rise.’