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Insights into UK manufacturing

What do manufacturers see as the biggest risk to growth in 2012?

Felicity Burch January 23, 2012 15:48

For manufacturers, 2011 was a year of significant upward pressure on input costs.

But in the last couple of weeks, data releases on consumer prices and producer prices would suggest that inflation is now starting to come off the boil. The year to December saw the slowest annual increase in producer input prices since October 2010.

High and volatile input prices can cause significant problems for manufacturers, so it is good news that price pressures are starting to ease. However, since the global recovery began, another problem has emerged: that of availability.

Over 80% of manufacturing executives said that a shortage of raw materials was a significant risk in 2012.

Our survey of manufacturing executives found that concern about the availability of raw materials is pervasive, across all sizes of business and industry sectors. In fact raw material shortages are such an issue that two thirds of companies saw this as the top risk to their business plans in the year ahead – considerably more than any other issue.

Why is this?

While some risks may dent growth, or cause less concrete knocks to business, being able to business, being unable to secure or fulfil orders, or having to run below optimum capacity are real and tangible outcomes that can arise quickly when there is a lack of raw materials. 

Outlook for prices and availability

Slower global growth as a result of the Eurozone crisis and the Chinese government’s attempts to engineer a ‘soft landing’ may have abated pressure on input prices, but availability and price of specialist materials such as metals and rare earths remain an issue.

The weaker economic outlook may alleviate commodity prices, but with global demand for inputs continuing to rise, the issue of raw materials prices and shortages is set to be a perennial one.

Disclaimer
This is an informal blog about manufacturing and the economy written by EEF's policy and representation staff. While it is written from an EEF perspective, contributions should not be taken as formal statements of EEF policy, unless stated otherwise. Nor does it cover all the issues on which we campaign - you can check these out in more detail at our main site.

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About EEF

EEF helps manufacturing businesses evolve and compete.  We provide business services that make them more efficient and management intelligence that helps them plan.  Our work with government encourages policies that make it easy for them to operate, innovate and grow.

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