UK manufacturing still reliant on overseas market

04-09-2006

Demand from abroad continued to prop up Britain's manufacturing sector as domestic orders remained muted, according to the latest engineering outlook survey from the Engineering Employers Foundation (EEF).

The first major survey of the UK's third quarter manufacturing performance reveals that while the balance of orders increasing or decreasing remained unchanged in the domestic market, overseas orders from the Eurozone and US rose by an impressive 14 per cent.

As a result of the increased orders, growth was registered across all regions apart from Northern Ireland, leading confidence to improve about fourth quarter prospects and to recruitment activity in half the UK's regions.

"Our survey provides welcome evidence that UK manufacturers are exploiting the strength in world markets," EEF's chief economist, Steve Radley, said.

"With domestic order books flat, manufacturers are increasingly dependent on overseas markets. While on the one hand this leaves us vulnerable to a downturn in the world economy, on the other the pressure of competing across the globe will help to keep a lid on inflation," he said.

Mr Radley nevertheless suggested that the sector's continuing recovery would stimulate inflation, leading him to advise uncertainty about the extent to which inflationary pressures will be affected by the latest manufacturing trends.

"Having fired a shot across the bows last month, the Bank should wait for clearer evidence of the need for a further rise," he said.

The EEF survey has now recorded strong growth in exports over the last 12 months, reaching what it claims is "the best sustained improvement since 1995".


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