Manufacturers in the South saw a further weakening over the past quarter with tough trading conditions expected to linger into 2013, according to a major survey from EEF, the manufacturers’ organisation, and accountancy firm BDO LLP published today.
According to the survey, sentiment turned negative in both output and orders in the last quarter down to a balance of -21% and 0% respectively as the weakening conditions seen through the course of this year finally took their toll. In particular, the continuing crisis in the Eurozone impacted heavily as those companies with a greater share of their exports into the EU were most negative.
Regional companies are also circumspect about the first three months of next year with only a slight improvement forecast. The improvement is nonetheless expected to push orders and output into positive territory.
Recruitment intentions have also fallen and are not expected to improve in the next quarter.
Commenting, EEF Chief Executive, Terry Scuoler, said: “There is little positive news in these figures. We’ve seen growth ebb away during the course of the year and many manufacturers are steeling themselves for a continuation of tough trading conditions in the next few quarters. The extent to which industry confidence has fallen since this year’s Budget makes it ever more urgent for the government to get to grips with growth and get behind companies seeking to invest and succeed in new export markets.”
Arbinder Chatwal, Head of Manufacturing at BDO Southampton, said: “A depressing picture of the region’s manufacturing sector has been painted in this quarter’s survey, for all but a few sectors and companies. The reduction in exports is a particular concern and, whilst this mostly reflects the turmoil in the Eurozone, it also highlights the scale of the challenge in growing exports to emerging markets to offset the downturn in much of Europe.
“On a more positive note, investment intentions seem to be defying gravity but the ongoing issues around access to capital and an unsupportive tax structure may yet have a serious impact on actual investment. This survey shows that the sector is nowhere near where the government wanted it to be two years ago and emphasises the need for a long term industrial policy focused on manufacturing.”
Commenting on Chancellor George Osborne’s Autumn Statement, Chatwal said in relation to business, and manufacturing in particular, “We welcome the decision to increase the threshold for the ‘Annual Investment Allowance’ for qualifying capital expenditure from £25,000 to £250,000 from 1 January 2013, which will be a material encouragement for small, medium and larger manufacturing businesses to invest in new plant and fixtures.
“However, it begs the question why the decision was taken to reduce it to £25,000 in the last Budget. Indeed over last few years the threshold has yo-yoed from £50,000 up to £100,000 down to £25,000 and now up to £250,000. Whilst this is only billed as a temporary increase, at least the Chancellor has pledged to keep the threshold at this level for two years. In our view, this should become a permanent measure.”
Business Taxation
“We also welcome the further reduction in the Corporation Tax rate from April 2014 and trust that next year the Chancellor will announce a further reduction to 20% from April 2015. This is the single most important parameter that ensures the UK continues to be internationally competitive for foreign direct investment by both multinational companies and international entrepreneurs.”
