Recovery in sight but stability vital for manufacturers

The fourth quarter survey from the manufacturers' organisation and BDO confirms that the worst of the downturn is behind the sector and the weak pound and recovering world markets are beginning to have a positive impact. But confidence across manufacturing remains fragile, as companies anticipate other obstacles on the road out of recession, such as increased exchange rate volatility and potential supply chain risks. EEF also warned that given the experience of previous recessions when investment took some three to four years to recover, the steep cutbacks seen during the current downturn present a significant threat to industry's longer term competitiveness. EEF chief economist, Lee Hopley (pictured), said that while conditions were continuing to improve on the back of recovering world markets and a weaker currency, there was little to suggest anything other than a long, slow haul out of recovery. She went on: "Manufacturers have been grappling with extremely difficult trading conditions for more than a year now, but we're not out of the woods yet and a great deal of economic uncertainty remains. Cutbacks in investment remain of particular concern. Whilst the need to address the public finances in the long term is urgent, this must be balanced with the need to continue with supportive measures underpinning a productive sector of the economy." Looking ahead, companies expected to see an improvement in conditions throughout 2010 but growth was likely to be anaemic. EEF is forecasting manufacturing output to have contracted by 10.4% in 2009 but to grow by only 0.9% in 2010. Engineering output is forecast to decline by 16% this year and zero growth next year.