Manufacturing scores to put UK top of EU growth prospects league

The survey of 200 senior executives paints a more positive outlook than the very muted picture of twelve months ago, with growth expected in all markets and across all sectors and sizes of companies.

This will be coupled with investment in new capacity in the UK. Two fifths of companies said they plan to invest moderately in the UK, with a further fifth saying their investment would be significant. Overseas, one third of large firms plan to invest compared to a fifth of SMEs.

But the EEF warns if investment pick up is further delayed there will be consequences for both supply chain capacity and growth across the wider economy; a downside scenario that policy makers must not lose sight of in the year ahead.

Topping the list of strategies for manufacturers in the year ahead are actions to improve productivity, greater supply chain collaboration, strong communication with employees and increased overseas marketing efforts. All of which will support growth plans and help to mitigate any emerging risks.

Terry Scuoler, chief executive of EEF said: "Manufacturers are telling us they expect to make a greater contribution to growth, investment and jobs this year. Innovation, energy and diversifying into new supply chain remain key opportunities but the UK and the eurozone are also looking better. However, global uncertainty and rising energy costs pose significant risks and, the challenge for industry and government this year will be to get industry’s investment plans over the line."

Mark Stephens, Deputy CEO and Group Commercial Director at Aldermore, added: "At Aldermore we work closely with manufacturing clients across the country and are seeing first-hand what the findings of this report suggests. Clients are certainly more positive about the future of their businesses than this time 12 months ago, with a determination to capitalise on an improving UK market and to secure more business in new export markets.”

According to the survey 70% of companies expect the UK economy to improve in the next year, with a similar number (62%) expecting manufacturing prospects to improve. This is mirrored in the outlook for the global economy where 57% of companies expect an improvement. However, the perception of global risk is highlighted by the fact just 3% of companies expect this improvement to be significant.

A range of specific risks were also identified with rising input costs being the largest (61%) of whom a third said it was their most significant. This reflects the impact of rising energy costs in particular although pay pressures, a factor not seen for many years, were also identified as a risk by a quarter of companies.

Almost the same number reported ‘insufficient supply chain capacity’ as a risk, reflecting the hollowing out of the UK supply base and the need to build it back again, a key factor in encouraging inward investment in sectors such as automotive and aerospace. However, half of companies said they planned to work more closely with their suppliers in order to address this risk.