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South West manufacturing surges as recovery takes hold

Manufacturers across the South West are experiencing a surge in activity as the long awaited recovery begins to take hold.

That’s according to a major survey released by EEF, the manufacturers’ organisation, and accountancy and business advisory firm BDO LLP.

According to the quarterly EEF/BDO Manufacturing Outlook survey, a balance of 38 percent of companies in the South West reported increased output, the highest for two years.

Order balances were also at a two year high, with 33 percent experiencing an increase.

South West manufacturers appear confident that results will still be positive moving into Q4 2013, with a balance of 20 percent and 29 percent forecasting output and orders to further increase respectively in the run up to Christmas.

However, the improved outlook does not appear to be translating into better job prospects, with a balance of minus 13 percent increasing headcount in Q3 2013.  This is expected to improve slightly moving into the final quarter of the year to a balance of minus 7 percent.

Investment intentions have also significantly increased across the region to 29 percent, compared to minus 18 percent (Q2) and minus 6 percent (Q1).

UK-wide, there are signs that investment performance may finally begin to regain ground lost in the past three years with investment intentions, especially amongst SMEs, escalating sharply to some of the highest levels seen in the survey’s history.

EEF South West region director, Phil Brownsord, said: “Industry’s prospects have brightened considerably in the past few months.

“There is growing confidence that improving trading conditions will continue into the final months of this year and then accelerate through the gears in 2014.

“However, while the signs of recovery that have emerged so far this year are positive, the need for better balanced growth from net trade and investment remains a necessity.

“As companies become more confident about their growth prospects, we need to see this translate into commitments to invest in new capacity, and for this to take place in the region.

“Government cannot afford to rest on its laurels at the first signs of positive economic news.  We need on-going action to ensure the UK is a competitive location for manufacturers to invest and grow.”

The EEF/BDO Manufacturing Outlook report also found that the rebound this quarter is being led by a stronger domestic market. But conditions in overseas markets have also picked up with the balance of companies seeing growth in export sales rising to a two-year high in the past quarter.

Rob Brown, tax director at BDO’s Bristol office, said: “A domestic market which is at its strongest for almost three years means manufacturers across all sectors and throughout the supply chain are feeling the benefits of an impressive return to confidence.

“The positive change in investment intentions is a powerful and important indicator, and key to the future growth and positioning of the sector in the regional, domestic and global markets.  

“But let’s reiterate, this is not ‘manufacturing sector – job done’ for the government. We must use it as a strong foundation for continued efforts to ensure the sector gets the support it needs to act as an engine of change for our economy.”

The more positive economic data for manufacturing in recent weeks has caused EEF to upgrade its forecasts for the economy and manufacturing for 2013 and 2014.

The economy is forecast to expand by 1.2 percent (1.1percent ) this year while manufacturing is expected to contract by 0.5 percent (0.7percent ).

However, next year growth is expected to accelerate with the economy growing by 2 percent (1.8percent ) and manufacturing by 2.1 percent (1.9 percent).