Manufacturers face a muted recovery

Research among more than 600 firms suggested that manufacturing will grow by 1.2 per cent in 2010 before picking up to 3.4 per cent next year.

But the Engineering Employers Federation (EEF) warned that some sectors of industry were only just about to see a downturn in their business.

The group estimated that the UK economy will only grow by 0.9 per cent this year, with credit constraints and a slow recovery in profitability likely to hold back business investment.

EEF chief economist Lee Hopley said: "Last year was a record for all the wrong reasons and the outlook for the UK economy this year is far from certain, with little momentum behind a recovery until the latter part of the year.

"While a stronger global economy and weaker exchange should help pull the UK back to growth, benefiting manufacturers in particular, things could still go wrong."

"The outlook for different manufacturing sectors is also highly variable. While some can safely say the worst is behind them others are only just beginning to feel the chill. In what will be an uncertain world in 2010, companies will still be looking for stability from policy makers."

Tom Lawton of accountants BDO LLP, which helped with the report, added: "For most sectors in manufacturing the damage and decline of the recession of 2008/2009 now appears to be giving way to the slow and difficult recovery of 2010.

"It looks like some of our key manufacturing sectors will continue to suffer the impacts of the global slowdown and global competition at least in the early part of 2010.

"Manufacturers will need to continue to implement cost-cutting measures, including staff reductions, to maintain profits in what will continue to be a very challenging market."