South East: Manufacturers continue upward trajectory despite uncertainty overseas, says EEF/BDO survey

South East manufacturers have continued their upward trajectory, reporting positives across every key indicator of business health and outperforming the UK average, according to the latest quarterly Manufacturing Outlook survey by EEF, the manufacturers’ organisation, and accountancy and business advisory firm BDO LLP.

The EEF/BDO data, published today, reveals that a balance of 40% of manufacturers in the South East have increased output in the past three months, with a balance of 20% also increasing orders.

In line with business confidence and performance, recruitment was also bolstered in 40% of companies - second only to the North West and East of England which both saw 44% of firms on balance taking on new staff.

The results are in contrast to the national picture, which has seen growth ease back to more moderate levels, with output and order balances both at 10%.

Looking forward to Q4 manufacturers in the South East are showing no signs of slowing down, predicting output and order balances higher than anywhere else in the country (50% and 40% respectively).

However, one area of caution is exports, with EEF issuing a warning that the demand picture is more uncertain than for some time. With the eurozone economy flagging significantly, political risks increasing and a stronger sterling exchange rate, export orders UK-wide are turning negative for the first time since the start of 2013.

Kevin Cook, partner and head of manufacturing at BDO LLP in the South East, added: “The continuing trend of strong business performance is welcome news to our regional economy and jobs market.  Manufacturers have ridden out the economic storm of the past seven years so they understand how to effectively navigate challenging conditions. I am always impressed by their agility, commitment to innovation and investment and to skills training for their people.

“Understandably, there is nervousness surrounding overseas market so a strong recovery in exports this year is still uncertain. My concern is that companies will use that as an incentive to focus investment on domestic markets, which is not where long-term sustainable growth will lie.”

Jim Davison, South East region director at EEF, said: “Growth in manufacturing remains particularly positive in the South East, however there are still risks which could threaten the pattern of growth going forward. In the face of this, while politicians may be focused on next year’s election it is critical that efforts over the rest of this parliament remain focused on sustaining growth across manufacturing and the economy.”

The EEF/BDO Manufacturing Outlook survey shows that most sub sectors reported an increase in output, with motor vehicles across the Midlands especially strong performers. Rubber and plastics manufacturers were the most upbeat with a balance of +80% of companies increasing output in the past three months. Electronics was the only sector to report falling output.

Nationally, EEF is continuing to forecast strong manufacturing growth at 3.3%, with a return to more normal long-term growth of 2.1% in 2015. Other key findings across the UK are:

• Output and orders balances positive, but down from last quarter.
• Domestic market remains the driver of output growth.
• Manufacturers expecting stronger export demand, despite past disappointment.
• Recruitment and investment intentions ease back, but remain solid.