MANUFACTURERS have reported further growth in the first quarter of 2011 and expect to drive economic recovery over the rest of the year.

The North East is showing a particularly strong manufacturing recovery with a healthy demand from overseas, according to sector organisation EEF’s latest quarterly survey.

The survey shows the fourth quarter of continuing growth of the sector with investment and recruitment intentions at a record high in the survey’s history.

Tony Sarginson, of EEF in the North East, said: “Manufacturers in the North East have picked up this year where they left off in 2010, with output growing and little sign that the export-led recovery is about to dry up.

“However, the picture for the rest of 2011 still remains uncertain as a number of economic headwinds persist and the potential impact of new geopolitical tensions adds another layer of uncertainty to economic forecasts.

“Companies in the North East continue to be cautious about committing to large, game-changing investments, which will ultimately support the right type of growth across the UK economy.

“Government must recognise that an ongoing recovery cannot now be taken for granted and use every club in the bag to sweep away barriers to growth in the Budget.”

However, some investment plans are largely driven by smaller-scale investments and increased employment continues to be dominated by agency or part-time working with relatively few companies recruiting in large numbers.

EEF also stressed that while the overall picture is one of ongoing recovery, the positive headline results are masking considerable uncertainty below the surface, especially with regard to significant capital investment projects which companies and the UK economy need to make to boost growth.

The survey shows that caution around the durability of the recovery and the cost of finance, particularly for smaller companies, mean solid demand now has not yet translated into the makings of a recovery in investment, a factor the forthcoming Budget will be critical in addressing.

The survey also shows more manufacturers have reached the limit of their ability to absorb further cost increase.

Jason Whitfield, of survey advisers BDO LLP, said: “Some companies have been able to increase prices by significant amounts as they seek to rebuild margins, considerably improving their margins for this year.”