The EEF to forecast that the sector will grow by 2.7 per cent in 2014 compared to 2.4 per cent for the economy overall

Manufacturing predicted to outpace economy in 2014

Britain’s manufacturers will grow faster than the UK economy overall next year, according to EEF, the manufacturers’ organisation.

A survey carried out by the body and business advisers and accountancy firm BDO found that manufacturing output headed higher for a balance of companies in the final months of this year, while increasing confidence is being reflected in recruitment and investment intentions.

Coupled with a growing orders pipeline this has prompted the EEF to forecast that the sector will grow by 2.7 per cent in 2014 compared to 2.4 per cent for the economy overall.

The improved performance during 2013 has also resulted in EEF revising its forecasts for this year, showing manufacturing contracting by just 0.1 per cent and the economy growing overall by 1.4 per cent.

EEF chief economist, Lee Hopley, said: “Over the course of the year we have seen a definite turnaround in prospects for manufacturing and this looks set to continue into next year. This increased confidence is evident in companies looking to increase their headcount and, most importantly for balanced growth, step up their investment.

“However, uncertainties in the global economy remain and a sustained recovery is not secure. As a result, growth must remain a priority for government over the remainder of this parliament, starting with the Autumn Statement this week.”

The survey found that both output and orders balances are down on expectations from the previous quarter with the export picture in particular looking more uncertain than in previous quarters.

Output and order balances fell back from the three and two year highs reached last quarter, though responses remained strongly positive with balances of companies indicating output and orders increased in the past three months coming in at 19 per cent and 18 per cent respectively.

The strongest positive balances were reported by companies in the motor vehicles and electronics sectors and the domestic market continues to be a source of strength across all sectors with a positive balance of 15 per cent of companies indicating UK orders increased.

Investment intentions for the year ahead strengthened further from 24 per cent to 27 per cent and remain at a six year high.

In addition, companies’ confidence for the year ahead is reflected in recruitment which has remained steady. A positive balance of 10 per cent of companies reported increased employment in the past three months, whilst the balance has increased to 16 per cent for the next three months.

Looking forward, the survey shows expectations for the next three months remain positive. Output is expected to improve next quarter with the balance of manufacturers expecting an increase ticking up to 25 per cent, whilst forward-looking orders balances are broadly steady at 19 per cent.

Tom Lawton, head of manufacturing at BDO, said: “Continued strong demand within the UK domestic market is very encouraging and this does suggest that a sustainable manufacturing recovery has gained a foothold in this country.

“However, international markets hold the key to a fully-fledged and meaningful improvement for in UK manufacturing and these markets remain frustratingly fragile.

“We haven’t missed the boat yet, but companies need to stand ready and be supported by an accessible, Government backed export framework in order to take full advantage of the recovery on the continent and beyond once it starts.”

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