Exports – take-off awaited

The Engineering and Machinery Alliance (EAMA) is an 'umbrella' organisation of nine like-minded, essentially mechanical engineering type associations that represent SME manufacturers – over 1,300 of them, employing 60,000 people and turning over more then £7 billion. EAMA's function is to lobby in the UK and EU; a particular example has been the influence we have been able to bring to bear during the recession, thanks to our monthly Business Monitor, the results of which we share with HM Treasury, the Department for Business and others. Now that we have a full eight months' worth, there are some useful indicators emerging that will guide our upcoming activities. For example, we ask firms each month what has happened to their inquiry and order levels. Compared to a month earlier, have they gone up, down or stayed the same? From this perspective, export inquiry levels have changed little so far for about half the companies, but UK inquiries are picking up. There are similar trends when it comes to orders. The ratio of firms reporting export orders – up, down or the same – has not changed very much in the last six months. In a sense, export orders may have held up better than UK orders. On the other hand, we can see a good improvement in the ratio of companies saying that UK orders are up, while for exports there has been a negative balance month on month since January. News on the employment front is little changed since May. Over a fifth of firms say they are still reducing numbers. But there is anecdotal evidence of a move away from some short-time working. There is even better news, albeit from a very low base, on investment, with one in ten firms reporting clients investing in all aspects of their business, and a quarter reporting some sort of investment activity, taking in training, new product design and innovation. Access to finance remains a major concern. The number of companies reporting difficulties looked to be on the decline since May. This month, there are even a few firms saying that they are finding it easier than in the past. However, disappointingly, there is also a significant increase in the proportion of firms reporting that access is more difficult. Worryingly, credit insurance has become so expensive that many firms have decided to carry on without it. For small engineered items of a few thousand pounds, this may not be a problem. Payment can be arranged before delivery, particularly for repeat orders. For larger contracts, suppliers ask for a deposit with the order, typically 20-30 per cent. The problem that has now surfaced is that the banks have doubled their charges for providing a guarantee to the customer for the deposit they have paid. Some, in addition, are even placing ceilings on the total amount of such business, which makes it more difficult for exporters to compete in international markets. Clearly, there's a lot of unfinished business, if we are to move out of recession. Exporting has to be key, so it is worrying to see inquiries and orders not taking off so far. As we move further into autumn, EAMA will be talking to HM Treasury, the Department for Business and the bankers about improving this position. If you have views that you would like to share with EAMA, email info@eama.info.co.uk First published in Machinery, October 2009