Manufacturers see strong start to 2015

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Our first quarterly survey of 2015 with new partners DLA Piper provides further evidence of growth across manufacturing at the start of this year. All the major indicators - output, employment, investment and orders - were positive in the past three months, remaining above their long-term averages.

UK manufacturing has seen a strong start to 2015 - here are the headlines:

  • Output and orders positive and in line with last quarter's expectations.
  • Domestic demand softens as companies in the oil and gas supply chain are hit by falling oil prices.
  • But export responses turn positive following two quarters of decline in 2014.
  • Manufacturers remain upbeat about growth prospects for their businesses and the UK economy this year.
  • Confidence continues to flow through to positive employment and investment plans.
  • Manufacturing growth forecast at 1.7% this year.

Output positive for two years

Manufacturers reported positive order balances for the eighth consecutive quarter, although at +13% the balance was down slightly from +17% in the final quarter of 2014. The outlook for the next three months continues to look bright with a balance of 21% of companies predicting further growth in output.


Export orders turn a corner

In contrast to previous quarters where growth has been driven by domestic demand, the balance eased to just +1%, down from +11% while export growth edged into positive territory at +1%, up from -3%.

However, this weakness in UK demand is limited to a few sectors, particularly those focused primarily on the oil and gas supply chain. Some of the sectors with a high presence in the UK oil and gas supply chain are basic metals, metal products and mechanical equipment. In each of these cases, manufacturers reported that UK orders had fallen in the last three months.


Some signs of demand picking up in Europe

While most exporters saw little change in demand conditions in their main markets over the past three months, there were some signs of improvement in Europe, with 28% of companies reporting an increase in demand. This tallies with stable, but positive PMI readings from the eurozone which also noted a orders growth at a seven month high in February. While this is coming from a base it could provide more support for UK export orders in the coming months.


Confidence feeds though to recruitment and investment

Two key new measures introduced this quarter are confidence indicators covering business conditions and overall activity in the UK economy. On both indicators there are moderate levels of optimism about growth in the next 12 months, with marginally higher confidence levels about business performance compared with UK economic prospects.

This positive outlook is reflected in job prospects and investment intentions which continue to remain reasonably strong. A balance of +16% of manufacturers plan to increase capital expenditure, the same as last quarter, which makes the nineteenth consecutive quarter of positive intentions.




Chief Economist

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