South East: Region’s manufacturers buck the trend as sector loses momentum, says EEF

The latest quarterly Manufacturing Outlook survey, published by EEF, the manufacturers’ organisation and DLA Piper, the global law firm, reveals a picture of weaker than expected growth for the sector, but signs that the South East’s manufacturers are bucking the trend.

Despite companies forecasting a pick-up in activity in 2015, the Q2 findings underline a loss of momentum in the first half of the year. The sector is still in positive territory, but showing signs of a weakening in key indicators, most notably in output and orders.

However, the same cannot be said for manufacturers in the South East who outperformed every other region for output and orders in the past three months. On balance, 47% of the region’s manufacturers saw output increase and 44% saw total orders go up too. And the solid performance looks to continue into Q3, with a balance of 28% forecasting increased output and 39% saying the same of orders.

There was also good news for jobs – a balance of 26% of the South East’s manufacturers were on the recruitment trail during the last quarter. Furthermore, 16% forecast a boost to employment for Q3.

The region’s results contrast sharply with those of other areas, such as the North East and North West, where manufacturers have been knocked back by the impact of slowing activity in the oil and gas sector on supply chain industries, where investment delays have knocked UK orders.

Nationally, the picture looks more muted. Although forward looking expectations remain positive, confidence about the next quarter and the next year has notched down. As a result, EEF is softening its 2015 manufacturing growth forecast to 1.5% (down from 1.7%) and to 2.6% (down from 2.8%) for the economy overall (GDP).

The survey does contain some bright spots for UK manufacturing however. While exports remain flat, a third of manufacturers are feeling more confident about European sales prospects and this is driving stronger expectations for exports in the coming quarter. At the same time, sectors supplying to consumers or construction have seen activity holding up well – a trend that looks set to continue into the next quarter.