We’ll get through
BUSINESS leaders in the region say they are surprised at an influential new survey, which claims North-east manufacturing is in “steep decline”.
The CBI’s latest regional trends survey showed a balance of 66 firms were operating below capacity during the last three months - the second worst in the UK - while 14% more firms reported a drop in output than a rise. In addition, the report gave a gloomy prognosis for the next three months and said domestic orders and exports would experience a “marked decline.”
But local business groups said the survey’s conclusions were at odds with the experience of many Teesside manufacturers.
Tony Sarginson, EEF’s regional manager for the North-east, said: “I don’t see this level of pessimism when I talk to local firms.”
He believes export orders will “hold up” on the back of strong performance in process and infrastructure projects.
“You only have to look at the amount of oil, gas, steel and automotive products leaving these shores,” he said. “It’s a good time for Teesside exporters because the pound is relatively weak against the euro.”
He added that the relatively low survey sample of only 525 manufacturers nationwide could account for the “surprising” conclusions.
This view was shared by the Federation of Small Businesses (FSB), which said the results did not take into account the performance of local SMEs.
Colin Stratton, FSB regional chairman for the North-east, said: “Our members appear to be riding any storm that is brewing and this is due to their expertise and ability in the small business sector.”
Meanwhile, the local office of the CBI admitted that although cost pressures were beginning to feed into the region’s manufacturing base, there were reasons for optimism on Teesside.
Assistant regional director, Liz Smith, said: “The outlook for the North-east is somewhat less downbeat than other regions with similarly high levels of manufacturing.
“North-east manufacturers have been able to pass on cost increases through price rises, therefore mitigating any impact on profit margins.”
The report said investment in plant and machinery is expected to show little change during the next 12 months, in contrast to “marked falls” across other areas of the UK.
But it also said a balance of -23 believed their orders would fall in the next quarter - suggesting that the worst effects of soaring raw material and fuel costs are yet to come.
Other new data substantiates this view. A report by the Chartered Institute of Purchasing and Supply said new orders fell at the fastest rate for nearly 10 years due to weaker demand from domestic clients.
The figures will heap pressure on the Bank of England to reduce interest rates when it meets this week, but most analysts believe inflation will force a rate hold.
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