Publishing its fourth quarter engineering outlook survey, EEF also used prospects of slower growth ahead and, a continued squeeze on margins, to reiterate its plea for no further costs to be imposed on industry in this week’s pre-budget statement.
EEF Chief Economist, Steve Radley, said:
“Manufacturers have enjoyed a strong year based on significant increases in exports but signs of a slowing world economy are making prospects look less certain for 2007. It is vital that the Chancellor does not increase the tax burden in his pre-Budget statement. If the recovery in investment is to be sustained he must signal his intention to improve our tax competitiveness over the rest of this Parliament,
Key findings of the survey:
· Firms report good trading conditions
· Export markets remain positive as domestic orders pick up
· Growth remains widespread across UK regions, sector picture mixed
· Investment remains firm despite continued margins squeeze
· Firms less confident about next three months
The balance of responses on output and orders in the past three months was in double-digits for the fourth consecutive quarter. Despite some softening in the eurozone and US economies in the third quarter, the survey pointed to continued robust export orders. Compared with the previous quarter there was a pick up in the domestic order books balance from zero in q3 to +7.
All sectors except motor vehicles saw a balance of companies increasing output. In line with the previous quarter’s results, balances were strongest in basic metals and electrical equipment. Mechanical equipment was also upbeat, reporting its eleventh consecutive quarter of double-digit balances as it continued to benefit from an upturn in investment spending here and abroad.
Output balances continued to be positive across all regions with six out of ten regions seeing output balances improve compared with the previous quarter, Northern Ireland and Yorkshire and Humberside being the most positive. The weakness in motor vehicles pulled down the West Midlands results from the previous three month period.
Investment intentions remained positive for the fourth quarter running, potentially good news for manufacturing’s future productivity performance. Over the past year, however, the sector picture has been more mixed, with only metals products and other transport reporting consistently positive balances over this period. In contrast, motor vehicles responses have been at or below zero for the past 18 months.
Looking ahead, companies have become less optimistic. The forward-looking responses on output and orders have fallen substantially, whilst responses on total orders were the weakest since the end of 2005. All sectors, except electrical equipment and electronics, expect some weakening of trading conditions in the next three months.
Bob Hale, chairman of RSM Robson Rhodes’ National Manufacturing and Technology Group, commented:
“There is no doubt that 2006 has proved to be a very good year for the manufacturing sector with companies experiencing strong demand for their products in both the Eurozone and the United States. With investment intentions remaining positive for the fourth quarter running which this should feed through to future productivity performance.”
ENDS
The survey was conducted between 2 and 22 November, with 1,060 companies responding. The results presented cover the full range of engineering sectors – metals, metal products, mechanical engineering, electronics, electrical engineering, motor vehicles and other transport equipment.
The EEF/RSM Robson Rhodes Engineering Outlook Report is sponsored by RSM Robson Rhodes, an international firm of chartered accountants and consultants. Its Manufacturing Technology Group offers a wide range of financial and advisery services to both private and listed engineering companies. This team provides advice on mergers and acquisitions, raising finance, tax efficient investments/deal structuring, manufacturing/business strategy, recruitment/remuneration and accounting issues.