Manufacturing recovery to be anaemic: new survey

The third quarter survey, from the manufacturers' organisation EEF and business advisors BDO Stoy Hayward shows that while in recent months conditions across the sector have stabilised after a turbulent twelve months of steep declines in output and orders, manufacturers are not signalling expectations for a quick turnaround in the sector's fortunes. The negative balance on investment is a particular cause for concern given the need for companies to invest for the upturn. Previous evidence suggests that investment intentions continue to be delayed from some time after the first green shoots appear. EEF chief economist, Steve Radley, said: "Manufacturers are telling us that output is starting to stabilise but there is little sign of confidence coming back. Production is well below pre-recession levels and the road to recovery is likely to be long and bumpy. Tight cashflow and continued problems with access to finance are likely to be major roadblocks. The government has a key role to play in ensuring these problems don't prevent companies from making the investments needed to take advantage of the recovery when it comes." The survey showed fewer companies reporting falls in output and orders, job cuts continuing at a slower pace, low investment intentions despite better cashflow, and a weak recovery in 2010. At BDO, head of manufacturing Tom Lawton (pictured) believes that the hoped-for recovery is not imminent. "This quarter has seen an improvement in output and orders but both balances continue to show double digit declines and the forecasts show continuing uncertainty in these key indices. The employment picture remains bleak and manufacturers have had to stop or delay investment plans as a result of the economy and the dire state of the financial markets. The survey suggests that 2010 will be a difficult year, with subdued growth at best across the sector as a whole - and continuing huge challenges for key sub-sectors such as automotive," he said.