Slowdown

A new survey published by

- the manufacturers organisation - together with RSM Robson Rhodes, shows that output and orders in the

fell back over the last three months, with growth at its slowest pace since Q4 2003.

This is line with the forward-looking trends from the previous survey which showed a marked drop in confidence. Export orders outpaced domestic orders, continuing the trend of the last two years.

In addition, whilst manufacturing continues to see some growth, rising costs and competitive pressures are hindering attempts to rebuild margins. As a result, investment intentions remain subdued and have weakened a little in the last three months.

By sector the picture was mixed, with transport equipment and metal products recording falls in output and aerospace being especially weak. The picture for other sectors remained positive with the balances weaker than in the last quarter but higher than the average for the last two years .

The regional picture was also mixed. The North East and North West were the strongest performers whilst output fell in the East of England and West Midlands where the weak performance of motor vehicles was a contributing factor. Similarly the decline in metal products output held back growth in Yorkshire and Humberside.

However, companies remain unable to raise prices. Together with increasing costs and competitive pressures, this is keeping margins tight with companies' cashflow balance falling to its lowest level for two years.

Lower output and orders volumes across some sectors also contributed to a slowdown in hiring. A balance of +2% of companies said staff numbers increased over the past three months and over half kept staffing levels unchanged. A fairly significant balance of motor vehicles companies cut jobs and employment in metals products also fell back. Job losses were mostly felt across the North West and Midlands regions.

Companies are not anticipating any increase in jobs over the next three months and losses are again expected to be felt in motor vehicles.

However, the past three months may prove to be a temporary soft patch rather than the beginning of a prolonged slowdown. A balance of +18% of companies expected to increase output over the next quarter and +20% believe orders will rebound, indicating that growth in manufacturing should continue at least over the first half of this year.

The survey was conducted between February 7 and February 25, with 1,154 companies responding. The results presented cover the full range of engineering sectors – metals, metal products, mechanical engineering, electronics, electrical engineering, motor vehicles and other transport equipment.