SE manufacturers beating gloom

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Manufacturers across London and the South East are continuing to defy the pervading economic gloom by posting their 20th consecutive quarter of healthy growth, according to the latest survey published by the southern regional arm of the manufacturers’ organisation EEF.

EEF South said that despite concerns over the UK economy, 99% of businesses surveyed predicted either a stable or growing order book, with demand overseas particularly healthy. However, the survey did highlight some signs of pressure on the manufacturing sector because although prices were increasing, margins were being squeezed and the last three months had seen a reduction in new order volume in the home market. Nevertheless, overall output volume and orders showed positive balances for the 20th and 7th consecutive quarter respectively, and the majority of manufacturers remained confident about future business prospects. Recruitment was steady, with little change predicted for the next quarter. Commenting on the survey outcomes, EEF South chief executive, David Seall said manufacturing was providing a beacon of light in the current economic gloom with EEF South member companies remaining cautiously optimistic about their immediate prospects. “Companies are responding to the squeeze on their margins from rising costs by continuing to invest in their businesses to drive up productivity,” he said. “However, at a time of heightened uncertainty, the government needs to send a clear message that it will ensure that the UK remains an attractive place to do business." David Caddle, principal specialist at the Manufacturing Advisory Service South East said that higher costs associated with raw materials, energy, components and shipping were starting to eat into profit margins. He said: "These figures show that investment in productivity gains is helping manufacturers to be more resilient to the credit crunch than many analysts had predicted. The pain of raw material price inflation and tighter refinancing seems to be balanced by the gain of a weaker pound for exporters and the sustained demand for quality output.” This stability is reflected in a growth in planned capital expenditure, with all manufacturing sectors reporting positive balances. EEF has now revised upwards its forecasts for 2008. Manufacturing is forecast to grow by 0.9% and engineering by 1.3% this year, with a slight improvement in manufacturing next year to 1.0%. Engineering growth is expected to remain at 1.3% in 2009.