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EEF survey reveals tough outlook for manufacturers

By Western Morning News  |  Posted: September 04, 2012

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South West manufacturers have seen some of the toughest trading conditions in nearly three years over the last quarter, according to a new survey.

The research, from EEF, the manufacturers' organisation, and accountants and business advisers BDO LLP, found that the last quarter has seen a marked dip in output and orders – although employment levels remained steady.

The survey found that an overall negative balance of manufacturers said that orders and output had fallen in the last quarter (-20 per cent and -6 per cent respectively) down considerably from the overall positive balance of the previous quarter (of 25 per cent and 31 per cent) in total.

Margins are under growing pressure over the past three months with a balance of 19 per cent reporting a deterioration in export margins and 24 per cent seeing a further squeeze on margins on UK sales.

Most firms remain positive about investment plans, but there has been a slight dip of 5 per cent on the previous quarter.

But despite the tough trading conditions, a positive balance of 17 per cent of manufacturers expect orders to grow in the next three months. As a result of the findings, EEF forecasts have been revised downward with a contraction of 1.5 per cent expected in 2012, with the sector regaining some ground with an expected growth of 1.5 per cent in 2013.

Speaking at a briefing event held yesterday in Exeter, Phil Brownsword, South West director of EEF said that much of the dip was a result of weaker exports.

"It's the exports that have really changed – they have slowed down," he said.

"It's very rare that you find any positive information in official sources that are coming out at the moment."

Mr Brownsword added: "The weaker global outlook precipitated by the on-going economic challenges in Europe has clearly hit home in our latest survey.

"Pockets of growth still remain in some sectors, but overall confidence appears to be draining away. The sharp drop in export balances over the past quarter is a particular concern given their importance to manufacturers and also our economy's reliance on exports as a source of growth. However, some positive news can be taken from the improvement in the short term outlook and the continuing commitment to invest across manufacturing."

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