Tough end to the year as global gloom gathers

The fourth quarter (Q4) survey shows further deterioration in most of UK manufacturing’s key indicators. After a big step forward in 2014, industry has taken a step back this year, the report said.

A spokesman said: “The gloomy outlook has prompted the first negative forecast for employment and investment in almost six years – a trend from which manufacturers in Yorkshire and Humber are not entirely immune.”

Output and orders are showing signs of weakening in the region. In the third quarter (Q3), a net 21 per cent of firms saw output increase – in Q4 this had fallen to a balance of six per cent, but with expectation that output will remain in positive territory in the first quarter of next year.

Manufacturers’ employment plans in the region have remained positive, with a net 15 per cent of firms expecting to be on a recruitment drive as they head into 2016.

“Investment plans for the year ahead however, appear to be taking a knock, with a net seven per cent of firms in the region expecting investment to decline in the year ahead,’’ the spokesman added.

“Although performance relative to the rest of the UK is holding up fairly well, manufacturers in the region do not seem to be feeling any more optimistic about the economy than their peers elsewhere.

“Confidence about their own business performance in the year ahead is looking slightly stronger, but still sees firms in the region coming mid-table, with Wales and the South East leading the way. Across the UK, manufacturing’s concerns about world trade growth and weakening demand from both developed and emerging markets have become more pronounced.”

The domestic market is also looking less supportive than in recent years, although some bright spots remain, in particular motor vehicles, aerospace and chemicals.

Nationally, output and orders balances fell sharply in the last quarter. It was the sharpest quarterly decline since the third quarter of 2014 when the collapse in the oil price first started to impact.

The lack of growth prospects in export markets has been marked and, after a brief improvement, manufacturers’ confidence in Europe has started to wane again, the report said.

As a result of the weakening position, EEF has revised down its growth forecasts for this year and next.

Manufacturing is forecast to contract by 0.1 per cent this year and recover slightly to grow by 0.8 per cent in 2016. EEF is forecasting GDP growth of 2.4 per cent in 2015 and 2.1 per cent in 2016.

Andy Tuscher, regional director at EEF, said: “The prospect of manufacturing growth this year has all but faded away with another disappointing set of indicators from our survey.

“The downbeat mood may not be universal across all industry sectors, but in the face of mounting challenges it seems to be spreading and companies in this region are certainly not immune. The impact on manufacturers’ employment and investment plans suggests that these clouds will be hanging over us as we go into next year. ..It is critical that Government continues to act to ensure that the UK is a competitive location for manufacturing.”

Richard May, the head of the manufacturing sector at DLA Piper, said manufacturers had faced a “very challenging” year.

He added: “The contraction of the sector in 2015 appears to have been a real blow to confidence and the outlook for next year is also rather gloomy.”