'Fledgling' manufacturing recovery continues

14-08-2006

Britain's manufacturing sector was boosted by higher orders during the second quarter of 2006 but the longevity of the present recovery remains uncertain, according to the Confederation of British Industry (CBI).

The CBI's latest manufacturing trends survey, published today, identifies high global demand as being the chief factor boosting the sector, but the recovery is only "tentative" because domestic demand remains muted.

Furthermore, high energy costs have dampened profit margins, combining to constrain the recovery still further. Although the sector's employment ratios remain negative the level of job losses, worst of all in Northern Ireland, the south-east of England and London, has reduced substantially.

Crucially, overall output improved thanks to orders made in the first quarter. Looking ahead, Doug Godden, the CBI's head of economic analysis, said: "Disappointing orders are a cause for concern, especially in the south-west, although firms nationally remain upbeat about demand next quarter."

Despite this Dimitri Gunawardena, an economist at credit firm Experian, predicted that manufacturing job losses in the third quarter of 2006 would total around 26,000.

"There is welcome evidence in the survey results that the UK manufacturing sector is at last benefiting from a buoyant global backdrop. But domestic orders remain stubbornly flat and this, together with import penetration, is constraining the strength and sustainability of the recovery," Mr Gunawardena said.

Output increased in most regions of the country, underlining the overall recovery which is currently taking place.

Only Yorkshire and the Humber saw stagnation while decline continued in the east Midlands and Northern Ireland; in all other areas, the north-west and Scotland especially, the resurgence in Britain's struggling manufacturing sector continued.


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