Today we published the first edition of Manufacturing Outlook for 2013 which shows that Britain's manufacturers have endured a tough start to the year. Trends seen in the past three months once again point to a struggling manufacturing sector but the view ahead is somewhat rosier.
Output and orders remained low as expected
For the second quarter in a row and in line with expectations, output and order balances remained around a three year low. Demand conditions remained difficult across a number of markets which is feeding through into poor orders from both the domestic and export markets. Europe continues to stand out as an especially challenging market with sluggish demand dragging on export growth.
Output and orders, % balance of change in the past three months
Signs of a more positive quarter ahead
Our Business Trends survey results provide some signs that manufacturers may see conditions start to turn around during the next three months. Output and order balances are expected to recover back to the levels seen in the early part of last year, with companies planning for growth in both export and domestic orders. Notably, there has been a big improvement in the proportion of companies that are planning for growth in overseas markets in the next three months, a trend which, importantly, is fairly widespread across most manufacturing sectors.
This forecast improvement in trading conditions in the three months ahead can also be seen in manufacturers' business planning. Manufacturers are planning to increase their employment levels in the next three months and they are looking to raise their capital investment over the next 12 months.
Investment plans, % balance of change
While the UK needs this positive news, particularly in a time where growth driven by trade and investment remains to be seen, a recovery cannot yet be taken for granted. As outlined in EEF's report The Route to Growth, we need to see a more concerted effort by government to boost growth and to provide the stability and certainty that businesses need to put their strategic plans and investment into action. The Budget, in a few weeks time, will be a good place to start.