North’s fall in orders is the steepest in the UK

Mar 4 2008 by Chris Knox, The Journal

NORTH East manufacturers are suffering from some the slowest levels of growth in the UK as they continue to be hit by inflation and weakening consumer spending.

A survey by the Engineering Employers' Federation (EEF) shows that the balance of North East manufacturers that have witnessed an increase in orders during the current quarter has plummeted to -5% from +47% during the previous three months.

The fall in orders is the steepest in the UK and has resulted in -5% of North East manufacturers recording an increase in output during the first three months of 2008 compared to +44% in the last three months of 2007.

The situation has already had an impact on the sector’s bottom line, with -11% of firms in the region experiencing positive cash-flow.

The survey, which quizzed 50 firms in the region, also revealed the reluctance of manufacturers to employ more staff, with just +3% currently recruiting compared to +33% in December.

The gloomy picture is made worse by reports that February saw the fastest increase in factory gate prices in more than eight years as firms struggled to absorb the higher cost of raw materials.

Alan Hall, EEF Northern Director, said: "Despite ongoing economic uncertainty and rising costs, manufacturers in the region remain confident about their immediate prospects.

"A number of companies are also maintaining their investment plans and are still taking on workers. It is vital that the forthcoming Budget does not make it more difficult for manufacturers to maintain their resilience by adding to the cost pressures that they face."

Bob Hale, head of manufacturing at Grant Thornton, said: "While manufacturing is this decade’s true economic comeback kid, the sector is not completely immune to the inflationary pressures and weakening consumer spending that are already impacting on other sectors.

"Manufacturers should give greater weight to defensive investment in the coming 12 months, with capital directed at reducing energy usage and improving production line efficiency to counter the challenge of the rising cost of raw minerals."

Despite the problems of the current climate, there is hope of a turnaround among manufacturers, with +14% confident of an increase in output over the next three months, while +11% are banking on a rise in orders.

Cameron Ross, regional director of the Department of Business Enterprise and Regulatory Reform’s (BERR) Manufacturing Advisory Service for the North East, said: "While the report highlights a fall in output and orders in the North East, these figures are only representative of the past three months.

"What really matters is what happens over the next year to 18 months and with output and orders remaining above the long term average and North East firms continuing to invest in growth and employment we have much to feel confident about."

This opinion is shared by a number of manufactures in the region including Nissan, which demonstrated its confidence in January by announcing the creation of 800 jobs at its factory in Sunderland.

David Swerdlow, UK public relations manager for Nissan, said: "As with most sectors at the moment, there are concerns among manufacturers who are uncertain about how the rest of the year will pan out. However, Nissan is very confident that it can achieve some positive growth this year.

"The owners wouldn’t have decided to create so many jobs if they weren’t confident that the North East wasn’t a good place to operate from. I think the secret is to always be one step ahead and not to rest on your laurels.

"I know that as soon as the finishing touches were being made to the Nissan Qashqai, the designers were discussing how they could take other ideas forward."

PAGE TWO: New EEF boss will keep an eye on region