Manufacturers in the West Midlands have surpassed order book targets and are forecasting a further increase in output in the fourth quarter of the year, according to the latest quarterly Manufacturing Outlook survey by EEF, the manufacturers’ organisation, and accountancy and business advisory firm, BDO LLP.
The EEF/BDO data, published today, reveals that despite a more difficult trading environment overseas business performance in the West Midlands has remained positive.
In line with the UK average, a balance of 10% of manufacturers in the West Midlands have reported an increase in output during Q3. A further 29% have seen growth in order books, a significant improvement on the predicted balance of 14% when manufacturers were asked three months ago.
In Q4, output is set to rise for a balance of 21% of firms with orders holding steady for a balance of 19%, indicating positive performances can be expected in 2015. Supporting this level of confidence, regional companies have bolstered recruitment intentions to a balance of +24%, compared to -3% just three months ago.
The one area of caution is in exports resulting in EEF issuing a warning that demand is now more uncertain than for some time. With the Eurozone economy flagging significantly, political risks increasing and a stronger Sterling exchange rate, export orders UK-wide are turning negative for the first time since the start of 2013.
Richard Halstead, Midlands Region Director at EEF, says: “Growth in manufacturing remains positive in the West Midlands, although confidence is understandably starting to return to more moderate and sustainable levels as the pent-up demand which built up during the recession begins to expire.
“However, there are clearly increasing downside risks overseas which could threaten the pattern of growth going forward. In the face of this, while politicians may be focused on next year’s election it is critical that efforts over the rest of this parliament remain focused on sustaining growth across manufacturing and the economy.”
Tom Lawton, Birmingham-based partner and Head of Manufacturing at BDO LLP, says: “Our manufacturing base cannot insulate itself from global market conditions, however growth in the region remains positive and long-term investment feels realistic at these levels. The results deliver particularly good prospects for the local jobs market.
“Although there is a mixed picture across manufacturers as a whole, both domestic and export demand for UK produced motor vehicles remains strong, due mainly to a continuing backlog, which is good news for the Midlands market. However, this cannot be relied on forever and it will be interesting to see which of the sub sectors emerges as the industry champion over the next six months or so. This will be decided to a large degree by the global market and how well regional companies are able to cater to the mega-economies of the world.”
The EEF/BDO Manufacturing Outlook survey shows that most sub sectors reported an increase in output, with motor vehicles across the Midlands especially strong performers. Rubber and plastics manufacturers were the most upbeat with a balance of +80% of companies increasing output in the past three months. Electronics was the only sector to report falling output.
Nationally, EEF is continuing to forecast strong manufacturing growth at 3.3%, with a return to more normal long-term growth of 2.1% in 2015. Other key findings across the UK are:
• Output and orders balances positive, but down from last quarter.
• Domestic market remains the driver of output growth.
• Manufacturers expecting stronger export demand, despite past disappointment.
• Recruitment and investment intentions ease back, but remain solid.