Strong manufacturing performance to lead growth in year ahead
1 min read
The EEF (Engineering Employers Federation) forecasts that manufacturing will outperform the rest of the economy although an impact is expected from spending cuts.
A continued strong performance from the UK's manufacturing sector spurred on by solid growth in export orders, particularly to emerging markets, is set to lead the continuing economic recovery in 2011. The report, 'Economic Prospects 2011', also shows growth for the economy is set to be better balanced as investment and net trade finally start making sustained positive contributions.
Last year the sector outpaced expectations and the overall economy by expanding 3.8%. This year, another strong result is forecast with 3.5% growth for manufacturing compared to a 2.1% growth for the economy as a whole. In 2012 growth is forecast at 3% and 2.6% respectively.
This balanced growth is broadly based across all sectors with the top performers forecast to include mechanical engineering and metal products, which benefit from having high exposure to export markets where demand is likely to be strongest.
However, the report also warns that there are some significant challenges to watch for this year that not only shape EEF's central forecast, but also suggest some caution. These include a separate survey which shows potential direct impacts on manufacturers as sharp government spending reductions start to bite. The report highlights four risks to watch in 2011
- Government spending cuts: one fifth of manufacturers expect to see direct impacts from the spending cuts coming through in reduced orders.
- Eurozone crisis: so far the export drag from Europe, both countries struggling with debt and those without, has been more than offset by strong export growth to emerging markets. However this could be put at risk if the crisis intensifies or in a worst case scenario imperils the banking system.
- Finance: access to finance remains a key enabler for business investment and growth. The flow of credit remains seriously weakened by the financial crisis.
- Commodity price rises: After already feeling input price pressure in 2010, manufacturers are looking to pass some of this on in higher output prices.
