UK manufacturing is ‘travelling sideways’

In the three months to July 2009, manufacturing output increased by 0.2% compared with the previous three months. The figure was boosted by July output which rose by 0.9%, registering the second monthly increase in a row. Graeme Allinson, head of manufacturing, transport and logistics at Barclays Commercial Bank, said manufacturers were going to have to get used to "travelling sideways" for the moment. He went on: "It is likely that these figures will continue to bounce around in this fashion over the coming months and although small increases are always encouraging, any dips should be no immediate cause for alarm. Manufacturers certainly need not embark on another round of destocking in the wake of variable monthly figures. "Growth in offshore markets is critical for UK manufacturers to exploit at a time where pressures are restricting domestic opportunities. Sterling remains competitive and significant predicted increases in GDP in both India and China are a good indication of where UK manufacturing should be turning its sights. Currently a seriously inadequate 3% of UK exports reach these markets, leaving plenty of room for growth." David Raistrick, UK manufacturing leader at Deloitte said the fact that factory output had enjoyed its largest increase in 18 months was "excellent news". for the sector. "The scrappage scheme, which has re-energised UK car production, has in turn helped provide the much needed boost to the wider manufacturing sector," he believed. "Given the vital role the UK manufacturing and automotive sectors are playing in a UK recovery, it is critical that these industries continue to stabilise and achieve sustainable growth. "While the manufacturing sector has picked up, we must not overlook that manufacturing output is still down on where it was 12 months ago. Some commentators have also noted that it is not as good as they may have expected. "There have been a number of conflicting reports on the current state of the UK manufacturing industry over the last four weeks demonstrating that the recovery may be at best fragile, though at least a positive improvement upon where it was in the summer. "The close relationship between the strength of sterling and the fortunes of manufacturing companies should not be discounted. Fluctuations in sterling over the next 12 months will also impact on the overall manufacturing outlook." At the manufacturers' organisation EEF, head of economic policy Lee Hopley, said the figures brought "a glimmer of optimism" although production remained significantly below pre-recession levels. "Given the recovery is likely to be a long and halting one, as governments start to think about when to reverse recent stimulus measures manufacturers will be looking for just as much stability in the upturn as when we were in the grip of the recession," she concluded. The most significant increases in July output came from the transport equipment industries (3.8%), chemicals and man made fibres (3.3%) and in the in rubber and plastic products industries (3.4%). The most significant decreases came in the electrical and optical equipment industries (2.5%) and in paper, printing and publishing (1.4%) Over the three months to July, the most significant rises were in transport equipment (6.9%), in rubber and plastic products (3.9%) and in wood and wood product (8.4%). The most significant falls were in the machinery and equipment industries (2.7%), electrical and optical equipment (1.9) and in basic metals and metals products (1.5%).