East Anglia: Region’s manufacturers defy nationwide gloom

MANUFACTURERS in the East of England have bucked the national trend by reporting an increase in output and orders over the past three months.

The latest survey of the sector by manufacturing organisation EEF and business advisers BDO reveals the toughest trading conditions for nearly three years across the UK as a whole.

The national output balance was the weakest since the end of the 2008-09 recession, with the continuing crisis in the eurozone and a slowdown in emerging markets both hitting exports.

However, the results show a stronger than expected performance by manufacturers in the eastern region, well ahead of the national trend.

Output and order balances came in higher than expected at plus 35%, compared with a flat balance of 0% predicted by firms in the previous survey.

Recruitment intentions remained in positive territory, continuing the trend seen since the beginning of 2010, with a balance of 33% of companies in the east indicating they increased their employment compared to the 0% balance expected last quarter.

The balance of responses on investment intentions also remained positive, but was 5% down on the previous quarter.

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And manufacturers’ margins came under growing pressure with a balance of 19% reporting a deterioration in export margins and 24% seeing a further squeeze on margins on UK sales.

Tom Lawton, head of manufacturing at BDO in the East of England, said: “The results of the survey paint a relatively positive picture for manufacturers in the region but with weakening markets across the board and pressures on margins, the next three months could prove difficult.

“Inevitably Europe continues to serve as a drag on exports and even the previously buoyant emerging markets are beginning to falter.

“With this extremely testing global backdrop it is crucial that manufacturers remain not only lean but also nimble enough to respond to future opportunities as and when they arise. This is something that the sector has not been good at in previous recessions.

“Larger companies in the region that have the ability to invest are continuing to do so and smaller companies are wary of not suffering a skill shortage by ensuring that they employ the best talent. All of this in the face of worsening market conditions. This indicates that manufacturers have learnt the mistakes of the past, are investing for the long term and are preparing themselves for an upturn in the market, whenever and wherever this may occur.”

Jim Davison, East of England director at EEF, said: “The sharp drop in export balances over the past quarter is a particular concern given their importance to manufacturers and also our economy’s reliance on exports as a source of growth.

“The risks of a more prolonged period of weak growth in global markets, which would continue to make economic rebalancing an uphill struggle, can’t be ruled out.”