Growth in British manufacturing will continue into 2015

Export orders return to positive territory

Britain’s manufacturers have reported positive news at the start of 2015. Export orders have returned to positive territory, and some firms have reported a pick-up in demand from European customers.

A survey of 400 firms from the EEF manufacturers’ organisation and global law firm DLA Piper suggests the positive run of output expansion across manufacturing for the past eight quarters will carry on in the first half of 2015. Investment plans continue to look robust and more small and medium-sized firms are expecting to hire in the next quarter.

While the sharp fall in the oil price has been hailed as a boon for consumers, driving down petrol prices, manufacturers in the oil and gas supply chain have suffered, with some investments in the North Sea postponed or cancelled. The affected sectors include basic metals, metal products and mechanical equipment, which have each reported falling UK orders in the last three months.

While the economic environment has been somewhat turbulent, export orders in early 2015 have nudged back into positive territory for the first time since the second quarter of last year.

Lee Hopley, the EEF’s chief economist, said: “Any concerns that manufacturing activity might wobble at the start of 2015 have been quashed with our latest survey showing that the main output, orders, employment and investment indicators all remained above their long-term average over the past three months. Particularly promising are signs of a return to growth in new export orders, vital for balanced growth in the UK.

“It’s clearly not plain sailing for all with the drop in the oil price feeding through to weaker demand in the oil and gas supply chain. While confidence levels overall are holding firm in manufacturing, policies to sustain positive investment plans, encourage exporters and improve access to skills remain the order of the day.”

The EEF expects manufacturing output to continue to grow at 1.7% this year, revised down slightly from 2% last quarter. GDP is forecast to increase by 2.8%, a slight upward revision from 2.6% last quarter.