Manufacturing at best level since 1995

According to the third quarter survey, activity strengthened in the latest three months with both export and domestic order books improving and all regions and industries seeing positive conditions. The survey showed the highest output and order balances since the first quarter of 1995. In addition, there was a significant increase in investment intentions and a further rise in the number of companies recruiting or planning to do so. The survey also showed that growth in manufacturing has become more balanced with domestic orders overtaking export orders for the first time since Q4 2002. This improvement in domestic orders could prove timely, given the potential for turbulence in financial markets to weaken growth in key export markets. EEF also cautioned that, despite upward revisions to its growth forecasts the current financial turmoil may add a degree of uncertainty to business conditions for the rest of this year and into 2008. EEF chief economist, Steve Radley, said: “Manufacturers are now enjoying a sustained period of growth and reaping the rewards of increasing their investment in skills and innovation. Long gone are the days when a strong currency and increases in interest rates would have stopped companies in their tracks. However, despite the UK economy providing a welcome boost, the current turbulence in the financial markets and a more significant slowdown in the US could weaken the outlook.” And Bob Hale, head of Grant Thornton’s manufacturing and technology group, said: “The growing focus on high quality, value added products across the spectrum of UK manufacturing is continuing to pay dividends, with manufacturers becoming increasingly successful at developing niche areas. This is reflected in the resilience and optimism of the sector despite the challenge of rising interest rates.” “With order books remaining strong, manufacturers are optimistic about the rest of the year in regard to investment in capital and people, but interest rate stability would certainly help counteract the possible effects of recent market turbulence on the sector in the UK.”