Manufacturing output at 'highest level' in ten years


UK manufacturing output is at its highest in ten years, a new survey has found.

The Engineering Employers' Federation (EEF) said that during the first three months of 2006, 22 per cent more manufacturers reported a rising order book than declared their orders were declining - the highest balance since 1996.

Strengthening export demand has driven the growth, with the balance of export orders rising to 19 per cent, the highest reading since the second quarter of 1995, the study showed.

Confidence about the outlook for the manufacturing sector over the next three months is also at its best in eight years, revealed the EEF survey, which was completed alongside consultants RSM Robson Rhodes.

More companies also hired staff, rather than implementing job cuts, during the second quarter of 2006, representing the first positive outlook for employment prospects in a year.

But the EEF warned that the number of manufacturing jobs in Britain is still likely to fall below three million before the end of 2006.

The manufacturer's organisation said that companies remained uncertain about the domestic market and that as such the Bank of England should refrain from raising the base interest rate from its current level.

Commenting on the results of the study, EEF chief economist, Steve Radley, said: "Our survey shows that manufacturers are making the most of a strong global economy, with exports, investment and employment all expanding."

"However, the domestic market remains subdued, suggesting that the monetary policy committee (MPC) should hold off from raising interest rates."

He warned that a move by the European Central Bank to raise its benchmark interest rate, as expected by analysts next Thursday, would also harm manufacturing interests because the eurozone represents Britain's biggest export market.

Chairman of RSM Robson Rhodes’ national manufacturing and technology group, Bob Hale, also stressed that continuing rises in commodity prices and energy costs would see companies' margins remain under pressure.

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