EEF: Uncertainty overshadows prospects for UK manufacturing

On a positive note, the survey concludes that emerging markets will override domestic worries to provide foundation of manufacturing growth in 2012. However, most manufacturers expect face external risks and challenges too. Key outcomes show: 1) Manufacturers share concerns about UK prospects in 2012 but are more optimistic about their own performance in the year ahead. 2) Weak domestic outlook leading companies to consider untapped and markets further afield for growth in sales of products and services. 3) Opportunities seen in changing consumer requirements and diversifying into new supply chain strategies. 4) Main risks to growth are external, with raw materials shortages topping the list of concerns for all sectors. 5) But actions being taken to mitigate risks sit alongside a continued focus on productivity and innovation. Manufacturers' uncertainty has fed through to a deteriorating view of growth prospects for the economy as a whole, the survey suggests. A fifth of executives expect conditions the UK economy in 2012 to be better than in 2011, but half believe conditions will worsen. Two thirds of executives have already adjusted their company business plans in response to the growing global economic uncertainty and firms are hunting out new, global markets for their products and services to take advantage of growth opportunities. The survey showw continued confidence in export markets, with over four fifths expecting sales to be the same or greater in 2012 compared with last year. Of these almost half saw greater opportunities in both products and services in more than one non traditional market. This comes on the back of a 20% year on year increase in exports to non-EU markets to October 2011. Responses on likely sales in the UK market are also broadly positive, especially among SMEs. This should also lead to some recruitment of permanent employees. EEF Chief Economist Ms Lee Hopley said that despite the uncertainty, there were still some grounds for optimism. "Most manufacturers continue to grasp the opportunities in untapped markets for services and in faster growing emerging markets," he noted. "Together with the diversification of supply chains, these factors are underpinning some confidence at firm level that sales will end 2012 higher." However, the report also highlights risks to growth plans, the greatest coming from raw materials shortages with 80% of executives reporting this as a concern. Concerns that growing pressure in supply chains and shortages or stretched lead times of some raw materials could impact on production are cited as a top risk to growth by two-thirds of executives. And inevitably the events in Europe and potential knock-on consequences on the UK and on the provision of finance are seen as major risk by two-fifths of companies.