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August 2, 2010    

Reports provide cautious outlook for UK’s manufacturing industry

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by Kay Murchie

The Engineering Employers Federation (EEF) has provided a cautious outlook for the UK’s manufacturing sector.

The industry trade body said the manufacturing sector experienced a strong start to the year but it needs to prepare for a decline in the autumn as a result of weak demand.

The EEF is forecasting growth of 3.8% this year - this compares with 1.1% growth forecast for the economy overall.

Official figures last month revealed UK manufacturing grew at its fastest pace for more than 15 years in May.

Output grew by 4.3% on the same month a year ago - the highest rate since December 1994, according to official figures from the Office for National Statistics (ONS).

EEF chief economist, Lee Hopley, comments: “Manufacturing has exceeded expectations so far this year with a broad-based recovery, supported by growth in world trade, a weaker pound and restocking.

“But with looming spending cuts here and more uncertainty in key markets, the prospects for different sectors will diverge over the coming year,” he added.

In a separate report about the manufacturing industry, the CBI’s latest quarterly SME trends survey revealed that a majority of companies are expecting a decline in output in the next three months.

The CBI survey said 41% of SMEs saw a rise in output rise in the three months to July, compared with 20% who reported a fall.

The balance of +21 per cent represented the fastest growth since April 1995, when the balance was +25 per cent.

Russel Griggs, chairman of the CBI’s SME council, explains: “Exports are leading the charge, reflecting the pick-up in global trade and the relative weakness of sterling, but firms are still seeing their profit margins squeezed because of rising costs.”

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