Export boost for region's manufacturers

James Newman said firms which export, particularly in the machinery, car part and hi-tech specialist industries, are doing well. He was speaking as new research showed the rate of expansion in British manufacturing slowed in August to a nine-month low.

"There probably has been a slowing of the growth but that is not necessarily unexpected on the basis that the first quarter of the year was pretty strong as there was destocking in 2009.

"Those sectors involved in exports (are doing well). While the currency has moved a certain amount in the last few weeks it is still in exporters' favour. Europe is still slowing down apart from Germany, which is proving to be a good market."

Mr Newman said there was also a demand from the aviation industry, as well as from car manufacturers, which was helping firms here as Britain emerged from recession.

"Most companies will continue to improve on 2009 but it will not get back to 2007 (levels) for some time – but that is no different to any other part of the economy.

"A lot will depend on the public sector and where the cuts go and how much encouragement the Government continues to give, or not, to manufacturing as a growth area."

The expansion of Britain's manufacturing sector slowed last month, according to research from Markit.

The seasonally adjusted Markit/CIPS purchasing managers' index fell to 54.3, from 56.9 in July, its lowest level since November.

The survey, based on information on new orders, production, employment, supplier performance and stocks of purchases, stayed above the neutral figure of 50.

Output rose for the 15th successive month and manufacturing production and incoming new orders both continued to grow in August.

UK manufacturers increased employment for the fifth successive month and average purchase prices also rose.

The slowdown in production growth stemmed from consumer goods although capital goods producers saw their work expand at a faster rate.

The survey also suggested that manufacturing growth could ease further over the coming month.

Howard Archer, chief economist at IHS Global Insight, said: "The survey is disappointing and reinforces suspicion that the first half of the year was as good as it gets for UK manufacturers.

"Manufacturers benefited in the first half of 2010 from healthier demand both at home and overseas, improved competitiveness in both domestic and foreign markets stemming from the weak pound, and lean stock levels.

"However, the August purchasing managers' survey fuels concern that manufacturers will see softer growth over the coming months as inventory adjustment comes to an end, tighter fiscal policy increasingly bites, and global growth slows.

"More worrying though, the new orders index fell to a 14-month low and indicated relatively modest growth in demand, which suggests that output is likely to slow further in the near-term at least.

"Domestic demand appears to have moderated particularly in August as the export orders index improved modestly (although it still pointed to limited demand). Furthermore, backlogs of work contracted in August at the fastest rate for 11 months.

"Despite the 1.2 per cent quarter-on-quarter jump in GDP growth in the second quarter, it is evident that the economy faces serious headwinds going forward."

Chris Forrest, Sheffield-based co-head of Barclays Corporate in Yorkshire and head of manufacturing for the northern region, said: "Despite a marked August slowdown in growth, UK manufacturing continues to climb back towards pre-recession output levels.

"However, there are still several key areas that must show further improvement in order to underpin a sustainable manufacturing recovery; stronger UK export growth, particularly in developing countries, employment moving from job replacement to job creation, and a marked increase in non-essential investment.

"In comparison with other sectors, we as a bank have seen very few bad debts within the manufacturing sector and virtually no write-offs through the recession. This shows manufacturing is already lean, but also points to a conservative sector, reluctant to take on more debt even if opportunities are presenting themselves."