Manufacturers see signs that gloom is lifting

Robin Watson, regional director of the Manufacturing Advisory Service (MAS), said there are still problems in the industry but firms making construction products, particularly for social housing, as well as those in the aerospace supply chain, are showing signs of improvement.

Manufacturers in the oil and gas supply chain, however, are still finding conditions difficult, however, because they went into recession later, he said.

Mr Watson was speaking in the week that official figures showed Britain had come out of recession in the final quarter of last year – but analysts were disappointed the economy grew by only 0.1 per cent, having predicted a stronger recovery.

Production industries expanded for the first time in two years and, within this, manufacturers saw output grow for the first time since early 2008, with an increase of 0.4 per cent.

Mr Watson said: "Manufacturers are expressing a greater degree of optimism than they were six months ago. They can see market opportunities develop."

Firms had tried to retain their core staff doing the recession, Mr Watson said, to avoid incurring an the extra cost of hiring and training staff when demand picks up.

"Businesses have tended to return to short-time working and retain people with lower salaries so they can respond to the upturn. It is (generally] a challenge in manufacturing to get the key skills in place."

Mr Watson, a chartered engineer who has spent his working life in the manufacturing sector, said the effects of the credit were still being felt by Yorkshire manufacturers.

"It is also a whole new world where cashflow is much more important."

The changes in customers' order patterns can still be seen, as they adopt a "just in time" approach to replenishing their stock, said Mr Watson. The tighter supply chain reflects the fact the industry is facing a "different paradigm".

The recession means the Yorkshire and Humber office of MAS is now carrying out between 80 and 100 business assessments each month, a doubling of the previous number, Mr Watson said. They are also making at least 50 new contacts a month with businesses.

"It is a recovery in manufacturing but it is going to be fragile and patchy but we are seeing overall a higher degree of optimism.

"We have a broad spectrum of manufacturers in this region but the significant growth will be achieved by those with a high-knowledge based content, such as advanced manufacturers and those working in low carbon."

Mr Watson also highlighted the landmark schemes, revealed last month by Lord Mandelson, the Business Secretary, which for a new nuclear research centre, backed by 25m of public money, to be built in Catcliffe, near Rotherham, while Rolls-Royce has agreed to build a new civil nuclear manufacturing facility in South Yorkshire.

The MAS programme is managed by YFM Business Development (part of the YFM Group) and is funded jointly by Yorkshire Forward and the European Regional Development Fund.