Improvements across North West manufacturing in second quarter

David Ost, North West Region Director at EEF

Prospects for North West manufacturers have improved over the past three months, with companies reporting the strongest output and orders balances for a year according to the second quarter Manufacturing Outlook survey published today by EEF, the manufacturers’ organisation and business advisers BDO LLP.

According to the survey, sentiment turned positive with both orders and output balances strengthening in the last quarter (up to a balance of 11% and 13% respectively). And North West manufacturers appear confident that positive trends on output and orders will remain steady into the next three months.

However, the balance of companies increasing headcount over the past three months dipped from +21% in 2013q1 to +3%. This is below the average reported nationally of +11% in 2013q2.

While investment intentions have been positive in recent years, growth in actual manufacturing business investment is still lagging. In the past quarter investment intentions balances have drifted down nationally and in the North West the balance of companies planning to increase capital expenditure dipped to -15%. This is a potential point of concern if the trend persists.

UK wide, the domestic market has improved as companies report the first positive balance on UK sales since 2012q2. However, responses were somewhat weaker on export sales, and manufacturers are a bit less optimistic about a strong rebound in overseas sales compared with three months ago.

Commenting, EEF North West Region Director, David Ost, said: “Positive manufacturing data has been somewhat easier to find in recent months and our latest survey provides further confidence that the sector’s prospects are improving. While the demand environment in major European markets remains weak, and some individual industrial sectors are facing their own specific challenges, the improvement in output and positive expectations on orders bodes well for growth going into the second half of the year. However, a couple of aspects, namely the relative weakness in export orders and the softening in investment intentions, suggest that confidence may still need to be tempered for now.”

Also commenting, Philip Storer, Partner at BDO LLP, said: “There seems a definite lightening of the mood amongst the region’s manufacturers supported by positive order and output balances. However, recovery in the sector still remains tentative with the survey results showing that companies are less optimistic about export orders, although it is not yet clear whether this is due to the difficulties in Europe or difficulties in establishing a sustainable presence is the fast growing emerging markets. It is at this important point where it is crucial for Government and lenders to get behind the numerous positive indicators emerging from the sector and do all they can to help build the momentum of a recovery or risk seeing things stutter once more.”