According to the Manufacturing Outlook Q2 survey, from EEF, the manufacturers’ organisation and accountancy and business advisory firm BDO LLP, manufacturers are still seeing a positive picture and business confidence indicators are holding up looking forward to the second half of the year.
However, the combination of an easing of global growth and increased political uncertainty has pushed the output balances in some sectors down from the lofty heights of last year.
Together with a weaker outlook in the construction sector supply chain this means the outlook for the sector as a whole is slightly more subdued than it has been for some time.
In addition, whilst recruitment and investment are still positive, the latter has fallen to the lowest level for a year.
Says EEF chief economist Lee Hopley (pictured): “We continue to see signs of growth across manufacturing and, given weaknesses elsewhere in the UK economy, it is vitally important that we sustain this. However, the durability of this upturn is looking somewhat more fragile as many of the positive forces driving expansion last year such as a resurgent eurozone, a surge in global manufacturing investment and competitive pound are starting to fade.
“New or heightened uncertainties have also come into play, not least what feels like crunch time in the Brexit negotiations which have led to amber lights flashing again on the business investment outlook. This matters both for growth now and our longer term productivity prospects.”
Survey findings:
·Overall output and orders eased downwards, but they still remained in positive territory and above their long run average at +26%
·Whilst the gap between export and domestic orders had closed significantly over the last year it went into reverse in the last quarter. Export orders posted a balance of +20 % whilst domestic orders slipped significantly to +9%
·In the last year growth has been broadly based across all sectors. In the last quarter, however, there was a marked difference between those sectors still benefiting from global growth and investment in capital equipment, and the performance of sectors in the UK-focused construction sector supply chain
·The outlook for firms in the second half of the year remains firm as output (+26%) and orders expectations (+20%) hold up
·This is resulting in continued recruitment intentions of +17% but a fall in investment intentions which have now halved since the last quarter of 2017
