Orders and output up as North firms buck trend
Jun 3 2008 by Iain Laing, The Journal
BUOYANT North-East manufacturers are leading the UK in a sector which seems to be defying the gloom apparent elsewhere in the national economy.
Manufacturers’ group the Engineering Employers Federation’s (EEF) latest survey discovered the region’s firms are reporting significant rises in output and orders – the highest in the UK.
Their performance has been described as “remarkable” by the EEF’s regional manager Tony Sarginson and the second quarter of this year is the 10th consecutive quarter of growth in the North East.
Yesterday’s good news was tempered, though, by a second survey by the Chartered Institute of Purchasing and Supply (CIPS) which said a three-year run of expansion in UK manufacturing production came to an end in May.
Mr Sarginson said: “The performance of the region’s manufacturing firms is outstanding. It backs up all the anecdotal evidence I find when talking to our companies. The credit crunch is not impacting on them. It is quite remarkable.”
He believes manufacturers in the oil and gas industries, the defence and transport infrastructure sectors are the most bullish.
“Manufacturers in the North East are providing a beacon of light amidst the current economic gloom and remain cautiously optimistic about their immediate prospects,” he said.
“Companies are responding to the squeeze on their margins from rising costs by continuing to invest in their businesses to drive up productivity.”
Trevor Harrison, managing director of umbrella organisation Northern Defence Industries, said: “Ongoing operations by UK forces are seeing many of the region’s supply companies prosper. The success of the region’s oil and gas companies – such as Wellstream and Duco – has been well-documented and this sector continues to perform well.”
George Rafferty, chief executive of NOF Energy, which represents the region’s oil and gas firms, said: “The increasing worldwide demand for oil and gas is driving the demand to discover more and more reserves in difficult environments, and this is an area where the region is a world leader.”
The survey published yesterday by the EEF and Grant Thornton did, however, add to the Bank of England’s concerns about inflation, with firms having increased prices and more expecting to do so, although the survey says manufacturers have not been able to pass on all of the cost rises they have suffered and that profit margins are being squeezed.
The CIPS manufacturing index fell to 50 from 50.8 in the previous month. A figure above 50 signals growth.
Bob Hale, head of manufacturing at Grant Thornton, said: “These figures show most manufacturers have made hay while the sun was shining, and are proving much more resilient to the credit crunch than many analysts had predicted.
“The pain of raw material price inflation and tighter refinancing is balanced by the gain of a weaker pound for exporters and the growing demand for the quality output that UK manufacturers have gained a reputation for producing.”
Liz Smith, assistant director of the CBI North East, said: “While some sectors are struggling in the current economic conditions – retailers are feeling the pinch as shoppers tighten their belts, and financial services are battling the credit crunch – manufacturing is so far proving resilient. Part of this strength comes from the diversity of manufacturing in the UK, from pharmaceuticals to car manufacture.”
EEF SURVEY
Key Findings of EEF survey
:: All regions reported healthy levels of activity, with the North East reporting the highest and Yorkshire the second highest.
:: Output in the North East up 16% on first quarter of 2008
:: Orders in the North East up 13% on first quarter of 2008
:: There is increasing pressure on margins
:: Investment and employment intentions remain firm
:: Companies confident about the next three months
:: Projected growth for 2008 revised upwards
