UK manufacturing reports strong exports for 2017 first quarter
UK manufacturing got off to a much stronger start to the year than expected, defying firms’ own expectations and providing a much-needed boost to confidence, recruitment and investment. So says the Ql 2017 Manufacturing Outlook from the EEF, and accountancy and business advisory firm BOO LLP.
The survey reports positives across all the sector’s key indicators, with output and orders exceeding all expectations. The balance of firms reporting an uplift in output (31 °/o) and orders (29°/o) is double what was expected, with the output balance hitting its highest level since Q3 2013. Importantly, all UK manufacturing’s sectors are seeing this positive trend.
The figures demonstrate manufacturer’s ability to make hay while the sun shines, with firms capitalising on a broad-based export recovery fuelled both by the drop in the value of Sterling, and an improvement in the economic performance of key markets. A balance of 54% of manufacturers report positive demand conditions in Europe while, overall, just a fifth of firms are yet to see any pick up in overseas markets.
Business confidence, has recovered since the EU referendum, and is now at a level last seen in 2015. This, coupled with the fact that firms are much busier and enjoying higher demand than they had expected, is supporting an increase in employment and investment intentions as firms strive to meet capacity requirements.
At the same time, with the crash in sterling driving higher input costs, manufacturers report that they are continuing to push through price hikes, with more still to come as they seek to alleviate pressure on margins. Domestic customers are bearing the brunt of these and this will clearly not be lost on the Bank of England, which monitors inflation.
With the positive and broad based trend looking set to continue into the next quarter, EEF has revised its growth forecasts upwards to 1.0°/o for manufacturing and 1.8°/o for GDP. At the same time, EEF warns that manufacturers still face short, medium and longer-term risks including uncertainty from forthcoming European elections, the new Trump administration, and Brexit.
Encouragingly, all UK regions have reported growth in manufacturing output in the first quarter of 2017. Output gains also appeared to be stronger than in the past quarter across most UK regions, with the East of England being the only exception.
Looking forward, output balances for the next three months remain in positive territory across the UK, consistent with strong expectations for new orders. A broad-based improvement in business confidence has also translated into better investment and employment prospects.
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