Weathering the storm

’s manufacturers are continuing to show their resilience despite the slowdown in the

and a raft of rising costs, according to one of the

’s leading business surveys published yesterday.

The third quarter engineering outlook survey, published by EEF and RSM Robson Rhodes, shows that growth continues to be slow but casts doubt on suggestions that industry is in recession. In contrast, whilst conditions remain difficult and margins tight, the survey reported a modest upturn in output in the third quarter in most sectors outside motor vehicles.

Firms have also become more optimistic regarding the next three months and the EEF is forecasting growth in the second half of this year. However, EEF has downgraded its forecasts for both engineering and manufacturing for the year as a whole, due to the weakness of official data for the first half of the year.

Commenting on the survey, EEF Chief Economist, Steve Radley, said: “Conditions remain tough for manufacturing but the picture is considerably better than official data suggest. Companies are continuing to show resilience, despite the effects of massive cost pressures and the current soft patch in the economy.”

By sector, motor vehicles contracted for the third quarter in a row and the metals sector also reported a deterioration in trading conditions. Other transport and electronics saw output increase with a marked improvement in export orders. Mechanical equipment increased for the sixth consecutive quarter.

The decline in motor vehicles means that East and West Midlands were the only regions to see output fall, whilst Scotland benefited from the pick up in electronics and the South West saw continued growth in aerospace.

The most negative aspect of the survey was the worsening of employment prospects. The balance of responses on numbers employed was the lowest level for over two years with all sectors except other transport equipment reducing job numbers.

Looking forward, EEF expects growth to pick up in the final quarter of the year with an increase in optimism for both output and orders. However, weak official data in the first half of the year has generated lower forecasts for the year, with manufacturing expected to contract by 0.6% and engineering showing zero growth.

Bob Hale, chairman of RSM Robson Rhodes’ National Manufacturing and Technology Group, commented: “Whilst a mixed picture has emerged over the past quarter, it is encouraging that companies are more optimistic for the coming three months. It is important that companies continue to invest and, prioritise, if spending plans need to be cut back.”