Manufacturing growing, against an increasingly turbulent backdrop

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Today's release of the index of production was encouraging as it showed that, despite facing significant shocks like the Japanese earthquake, manufacturing has now seen eight consecutive quarters of growth. In fact, growth in the month to September at its strongest rate since May. But these are backward-looking figures. The outlook for growth in the next few months has become considerably more challenging.

Although we are forecasting growth in manufacturing of more than 3% this year and nearly 2% next year, you only need to look to the events in Europe over the last few days to see how quickly the economic environment can change.

Despite challenging outlook manufacturing should grow by more than 3% in 2011Manufacturing output (Index, 2005 = 100)

Source: ONS, EEF, Oxford Economics, 2011

The turbulence in the Eurozone is an increasing concern for an export-focused sector like manufacturing. It emphasises the need for government to ensure the Autumn Statement is used to help companies invest and grow. Government cannot affect the external outlook but it must pull every lever at its disposal to sweep away the barriers that are holding companies back.

Our key recommendations relate to: tax, access to finance, regulation and skills.

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