Manufacturers’ organisation EEF says that the UK manufacturing sector could return to growth this year, according to their quarterly EEF Manufacturing Outlook survey.
However, the survey also revealed that many manufacturers are worried about the world economy. Concerns include the results of a commodity price rout, cheap steel from overseas and the economic downturn in China. Because of these worries, manufacturers said their hiring policies and plans for investing would be negatively affected.
EEF surveyed 369 companies in the UK manufacturing sector. Many said they expected output to grow again as their order books became healthier.
Key points from the survey:
- Output balance edges up after hitting weakest point in six years in Q4 2015.
- Total orders also up, with stabilisation expected over Q1 2016, particularly in export orders.
- Risks remain high, weighing on manufacturers’ confidence to invest and hire new staff.
- Sectors exposed to slump in oil price continue to be the hardest hit.
- EEF revises GDP forecast down to 1.9%.
- Manufacturing growth forecast down to 0.6% from 0.8%.
Lee Hopley, EEF chief economist:
"After the gloomy end to 2015, this latest data shows a chink of light. But we shouldn't be getting the deckchairs out yet. The slide is bottoming out, but manufacturing is still in negative territory and faces a precarious climb back up amidst a storm of real uncertainty. In a two-speed scenario, the fact that even those sectors in the fast lane are not relaxed about the global outlook probably says it all.
"What these findings make clear is that manufacturers face challenge enough – they certainly don’t need more pressure from domestically generated uncertainty or costs. Almost 4 in 10 identify rising business costs as a key risk this year while the proportion of companies viewing the UK as a competitive place to do business has fallen from 70% in 2015 to 56% this year.
"We’re urging the Chancellor to take this message on board and signal support for the sector by avoiding creeping cost and policy changes at the next Budget."
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