The EEF/BDO Q3 Manufacturing Outlook survey shows that manufacturers have taken the continued political upheaval and uncertainty at home in their stride, taking advantage of the upswing in the Eurozone in particular, as well as the synchronised upswing in global trade.
This boost in trade has benefitted all sectors, with the boost to confidence about individual firm performance translating into a positive picture for both recruitment and investment intentions in the near term. The latter is being aided by an improvement in profit margins, the survey shows.
In contrast to confidence about their company performance, however, the same cannot be said for their outlook for the UK economy where confidence indicators have dropped for the second quarter in succession in response to weak consumer spending and political uncertainty. Moreover, inflationary pressures have not completely subsided, with recent sterling depreciation likely to provide another ripple of price increases in the coming months.
Says EEF chief economist Lee Hopley: “Manufacturers appear to have taken the recent political upheaval in their stride and are taking advantage of growing world markets to make hay while the sun shines. This period is likely to be the peak, however, and we are likely to see a more stable picture in the coming months rather than any further significant acceleration.
“There is little doubt that Brexit is likely to weigh on sentiment over the next 12 months with uncertainty over the UK’s terms of exit. As such, it is vital the government sends a signal to industry and investors in the UK and overseas that it is doing everything in its power to get growth of the UK economy back on the agenda. This must include a bold and ambitious cross -government industrial strategy.”
Key findings:
- Both output and orders were in healthy territory with the output balance surging to +34% (+26% in Q2).
- Orders balances have seen further gains with total orders reaching a historic high of +37% (+25% in Q2).
- While UK orders remained on the softer side, export orders have continued to climb, reaching a balance of +33% (+28% in Q2).
- Three fifths of companies reported positive demand conditions across the UK’s largest market, virtually unchanged from Q2, up from 47% a year ago and double the figure for Asia.
- The balance of companies taking on more employees rose for the fourth consecutive quarter to +25% (+21% in Q2), reaching a three year high in the process.
- Similarly investment prospects have had a strong quarter with capital expenditure plans more than doubling to +15% (+7% in Q2).
