Manufacturing revival?
12 Feb 2004
Manufacturers across most regions of the UK reported an increase in new orders over the past three months and for the first time in over three years all regions expect output to rise over the coming months.
The latest Regional Trends Survey, published yesterday by the CBI and Experian Business Strategies, also shows job losses easing over the coming three months but some 29,000 manufacturing jobs are still expected to go in that time.
The survey shows a mixed picture across the regions. Business optimism improved markedly in most regions, the exception being the West Midlands, the East Midlands and East of England. Export optimism also failed to revive in these regions, reflecting a relatively weak trend in export orders.
This highlights the fact that some regions seem to have benefited from strengthening global demand to a greater extent than others. New export orders continued to decline in five of the eleven regions but rose strongly in Northern Ireland, the North West and Yorkshire and the Humber. Total new orders grew strongly in these three regions - along with the South West where the strength of domestic orders offset a disappointing export trend.
Many regions are optimistic about their prospects for total orders in the next three months, in particular the North West and Yorkshire and the Humber. This has provided a boost to investment intentions. For the first time in six years, the balance of responses regarding capital spending on plant & machinery is positive at the national level. Eight regions expect to authorise more expenditure in 2004 than in 2003 but the West Midlands remains very depressed, with the highest negative balance for almost three years.
The survey suggests that employment in manufacturing will continue to contract in the next three months. The South East and London is likely to see the largest decline in jobs in that period, in percentage as well as absolute terms.
Peter Gutmann, from Experian Business Strategies, said: 'Strengthening global demand is clearly beginning to turn things round for manufacturing, but the divergent regional experience is interesting. The 'sectoral' mix is crucial. Regions with a high exposure to sectors where demand remains flat, such as the West Midlands with its dependence on the motor industry, have yet to benefit meaningfully. At the other extreme, global demand for chemicals has picked up strongly, and the North West has seen a rebound in orders and confidence.'
Doug Godden, CBI Head of Economic Analysis, said: 'There are now clear signs of a revival in manufacturing at the national level, with rising demand from overseas playing an important role. But policy makers should take note of two facts. The recovery in demand has yet to spread to all parts of the UK. And the decline in manufacturing jobs, across the country, looks set to continue for a while yet.'
The results of the CBI/Experian Business Strategies Regional Trends were taken from 828 replies to the CBI's Quarterly Industrial Trends Survey received between December 11 2003 and January 14 2004.
