Manufacturing sees an easing in financial plight

Analysis by business advisory firm Deloitte found that the number of manufacturing companies falling into administration in the first quarter of this year declined to 86 compared with 105 in the same period last year.

David Raistrick, UK manufacturing industry leader, based at Deloitte’s office in Leeds, said: “The manufacturing sector has shown positive signs of recovery over the past 12 months and this reflects a healthier industry.

“Orders picked up throughout last year, driven by a recovery in end demand. The 20 per cent decline in sterling against the euro has undoubtedly helped to give a much needed boost to exports in the sector.

“There were fewer administrations in this sector in 2010 than in any of the previous three years.

“This trend is encouraging but the Q1 2011 figures lend a note of caution to this optimism.

“The number of administrations in Q1 2011 is higher than the previous three quarters in 2010 possibly indicating that demand is softening.

“This, combined with recent data on purchase orders is less encouraging, and we cannot preclude a further rebound in these figures if the recovery in demand is not sustained.”

Data issued last week showed that manufacturing activity was weaker than expected in April.

A sharp slowdown in new orders cast a cloud over what has been a bright spot in the economy.

The Markit/CIPS manufacturing PMI headline index fell to 54.6 in April, its lowest since September, from a downwardly revised 56.7 in March.

Figures above 50 show expansion.

Manufacturing has been one of the healthiest sectors of the economy since Britain emerged from a recession in late 2009.

The PMI survey’s headline activity rate has stayed above the 50.0 mark that separates contraction from growth for 21 months.

The sector, which accounts for about 13 per cent of the economy, grew 1.1 per cent in the first quarter according to official data, helped by a weaker pound and strong export demand.

However, some economists have warned that the outlook for manufacturers has deteriorated sharply.

Fears over the pace of the economic recovery in the UK were fuelled yesterday by weaker-than-expected manufacturing figures.

Industrial production, which includes sectors such as mining and energy supply, grew 0.3 per cent month-on-month in March, while manufacturing output edged ahead 0.2 per cent, the Office for National Statistics said.

Economists were expecting growth of 0.8 per cent and 0.4 per cent respectively.