Export-led demand at heart of drive for recovery

This bullish assessment is contained in the first quarter 2011 Manufacturing Outlook survey published by EEF, the manufacturers’ organisation and accountants and business advisers BDO.

The survey found that investment and recruitment intentions were at record levels. However, some investment plans are being driven by smaller-scale projects and the extra jobs are often linked to agency or part-time working, with relatively few companies recruiting in large numbers.

EEF also stressed that while the overall picture continues to be one of ongoing recovery, the positive headline results are masking considerable uncertainty below the surface, especially with regard to significant capital investment projects which companies and the UK economy need to make to boost growth.

The survey also shows that more manufacturers have reached the limit of their ability to absorb further cost increase, with a balance of 26 per cent of companies raising their prices over the past three months.

Lee Hopley, the EEF chief economist, said: “Manufacturers have picked up this year where they left off in 2010, with output growing and little sign that the export-led recovery is about to dry up in the near term.

“However, the picture for the rest of 2011 still remains uncertain as a number of economic headwinds persist and the potential impact of new geopolitical tensions adds another layer of uncertainty to economic forecasts.

“Companies continue to be cautious about committing to large, game-changing investments, which will ultimately support the right type of growth across the UK economy. Government must recognise that an ongoing recovery cannot now be taken for granted and use every club in the bag to sweep away barriers to growth in the Budget.”

Jason Whitworth, a partner, at BDO, said: “The data points to price increases among manufacturers, driven in part by underlying movements in the cost of raw materials.

“We are seeing evidence of this among our client base, where some companies have been able to increase prices by significant amounts as they seek to rebuild margins, considerably improving their margins for this year.”