EEF and Grant Thornton report shows manufacturing well placed to weather economic storms
0 Comments Published by innovasys on Thursday, 15 May 2008 at 14:13.
UK manufacturing is well placed to weather potential economic storms this year according to a review of the sector’s performance published today by EEF, the manufacturers’ organisation and Grant Thornton.
This shows that manufacturing continues to enjoy a renaissance with a range of indicators showing that the sector enjoyed its best performance in a decade in 2007,and that companies have benefited from a range of measures that they have put in place to improve their competitiveness.
The report illustrates the rapidly changing face of manufacturing as companies shift to higher value activities with their competitive advantage based on an increasing emphasis on areas such as design, development and service provision.
Furthermore, the report also shows the number of highly skilled jobs expanding despite the loss of unskilled work. Commenting, EEF Chief Economist, Steve Radley, said:
“Manufacturers continued to record healthy growth last year despite a more challenging environment with oil prices rising and the dollar weakening. With fears of a recession in United States and turbulence in financial markets, the economic backdrop is likely to become less favourable and growth in manufacturing slower. However, manufacturing's new resilience will leave it much better placed to cope with whatever the economy throws at it this year."
In the report, EEF’s analysis shows:
· The best conditions for manufacturing in ten years with rising levels of output and expanding employment levels
· Investment intentions in 2007 were the strongest since 1995
· Productivity in manufacturing us up by quarter in the five years to the third quarter of 2007.
· The balance of companies reporting improving rather than falling profitability has risen from -4% in 2003 to 34% in 2007
· The increasing dependence of manufacturers on overseas markets with one third of companies exporting half or more of their turnover.
· 35% and 28% of companies rate China and India respectively as a future major opportunity. The number of companies rating the new EU members as a growth opportunity has trebled since 2004.
· The motor vehicles sector saw an especially strong year with the highest output balances in a decade on the back of new models and consumer demand.
· Companies are constantly exploring new ways of responding to international competition with 39% citing new market entry as their top strategic priority and 71% increasing their innovation activity
· Although some companies expect to see some production and assembly move out of the UK in the next five years, seven out of ten expect the UK to remain their prime location.
Bob Hale, Head of Manufacturing at Grant Thornton, commented:
"Against a backdrop of profit warnings, falling business confidence and credit market turmoil, the UK manufacturing sector is at present something of a beacon in the dark. The strategic focus on new market entry is particularly positive, as it signals that many businesses within the sector are harnessing the strong growth rates still apparent in many parts of the world to counter the effects of a slowing domestic economy."
The uncertain wider economic climate has resulted in some mixed findings. What is certain is that small and medium-sized manufacturers are continuing to feel the impact of higher fuel and raw material costs, and that they are now having to pass these on to customers."While the drop in export orders is worrying, particularly for medium-sized firms, there are some more encouraging signs: smaller firms have been quite bullish about taking on extra staff, and some growth in output is forecast for the months to July."Russel Griggs, Chairman of the CBI's SME Council, said:
This shows that manufacturing continues to enjoy a renaissance with a range of indicators showing that the sector enjoyed its best performance in a decade in 2007,and that companies have benefited from a range of measures that they have put in place to improve their competitiveness.
The report illustrates the rapidly changing face of manufacturing as companies shift to higher value activities with their competitive advantage based on an increasing emphasis on areas such as design, development and service provision.
Furthermore, the report also shows the number of highly skilled jobs expanding despite the loss of unskilled work. Commenting, EEF Chief Economist, Steve Radley, said:
“Manufacturers continued to record healthy growth last year despite a more challenging environment with oil prices rising and the dollar weakening. With fears of a recession in United States and turbulence in financial markets, the economic backdrop is likely to become less favourable and growth in manufacturing slower. However, manufacturing's new resilience will leave it much better placed to cope with whatever the economy throws at it this year."
In the report, EEF’s analysis shows:
· The best conditions for manufacturing in ten years with rising levels of output and expanding employment levels
· Investment intentions in 2007 were the strongest since 1995
· Productivity in manufacturing us up by quarter in the five years to the third quarter of 2007.
· The balance of companies reporting improving rather than falling profitability has risen from -4% in 2003 to 34% in 2007
· The increasing dependence of manufacturers on overseas markets with one third of companies exporting half or more of their turnover.
· 35% and 28% of companies rate China and India respectively as a future major opportunity. The number of companies rating the new EU members as a growth opportunity has trebled since 2004.
· The motor vehicles sector saw an especially strong year with the highest output balances in a decade on the back of new models and consumer demand.
· Companies are constantly exploring new ways of responding to international competition with 39% citing new market entry as their top strategic priority and 71% increasing their innovation activity
· Although some companies expect to see some production and assembly move out of the UK in the next five years, seven out of ten expect the UK to remain their prime location.
Bob Hale, Head of Manufacturing at Grant Thornton, commented:
"Against a backdrop of profit warnings, falling business confidence and credit market turmoil, the UK manufacturing sector is at present something of a beacon in the dark. The strategic focus on new market entry is particularly positive, as it signals that many businesses within the sector are harnessing the strong growth rates still apparent in many parts of the world to counter the effects of a slowing domestic economy."
The uncertain wider economic climate has resulted in some mixed findings. What is certain is that small and medium-sized manufacturers are continuing to feel the impact of higher fuel and raw material costs, and that they are now having to pass these on to customers."While the drop in export orders is worrying, particularly for medium-sized firms, there are some more encouraging signs: smaller firms have been quite bullish about taking on extra staff, and some growth in output is forecast for the months to July."Russel Griggs, Chairman of the CBI's SME Council, said:
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