UK manufacturers' expectations improve markedly - survey

Confidence among UK manufacturers is on the up, according to a survey by accountants KPMG. The firm reported that two-thirds of manufacturers surveyed expected business activity to improve during the next twelve months.

In particular, UK participants in KPMG's Business Outlook Survey showed a steep increase in confidence regarding new orders, which they expected to support higher revenues. Companies are widely expecting an improved market situation and the marketing of new products to support revenue growth, the firm added.

KPMG noted that, with regards to profits, UK manufacturers were more bullish than the companies it surveyed in other EU countries during July. However, the survey also found that investment plans remain subdued, with companies' expectations for R&D and capital expenditure being broadly neutral. Job prospects are a little better, and have risen steeply since the winter.

Of course, it could simply be that business has slumped so far that it's hard to see it getting worse, as Alan Buckle, KPMG's global head of advisory, acknowledged. 

"Before getting too carried away with talk of recovery, let us not forget that we are still firmly rooted near the bottom of the economic cycle; only the UK shows optimism on recruitment and there are more cuts signalled in investment," he said. "The fact that optimism is far less in evidence around the prospects for improved revenues tells us there is still some way to go on the road to full recovery.

"The question now must be - are businesses properly prepared for the upswing which these figures hint at? Expecting an upswing is one thing; having measures in place to actually benefit from weakened competition, fragmented markets and healthier customers is quite another. In time, those that failed to foresee what was a very dramatic downturn will likely be forgiven. History may be less forgiving of those who fail to prepare for the recovery."

Gautam Dalal, head of diversified industrials for KPMG in the UK, warned though that currency factors and recovery from a slump should not be mistaken for substantive growth.

"While the positive stimulus provided by relatively weak sterling is no doubt a factor behind the higher than average sentiment in the UK, the turnaround in net balances for activity, revenues and profits across the EU indicate there may be more substance to the marked rise in confidence within the manufacturing sector compared to our last survey in the winter," he said.

"The recent flow of news on the health of the UK economy has been mixed and while our survey suggests there are signs of growth in the manufacturing sector, the jury is still out as to whether we are seeing anything more than just an inventory bounce."

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