The Q3 manufacturing outlook survey released yesterday by business advisory firm BDO LLP and EEF, the manufacturers’ organisation, revealed that the UK manufacturing sector is seeing its strongest growth in activity for over two years.
A strong rebound in output and orders, which are growing at the fastest rate for 19 years, is being led by a stronger domestic market. The survey showed that a balance of 32% of companies reported increased output, up from 12% in Q2 and the highest since the beginning of 2010.
Order balances increased significantly, up to 27% from 7% in Q2. This quarter’s survey also showed that the gains are broad based across all sectors, whereas in the last few years there has been a clear sector divergence.
Domestic orders were 20% stronger than the export orders balance at 15%, domestic orders in all sectors except the mechanical equipment sector, where both export and domestic order balances have seen a solid rebound.
Electrical equipment and motor vehicles sectors were reported to have the strongest positive output and order balances, with output for electrical equipment and motor vehicles at 42% and 44%, while order balances for both sectors were 35% and 39%, respectively .
Companies expect orders from both domestic and export markets to increase by 24% and 19% respectively, during the next three months, with UK demand expected to continue to outweigh demand overseas.
Investment intentions have also rebounded with a balance of 24% of companies saying that they are planning to increase their capital investment in the year ahead. This increase of 7% over the last quarter was driven by small and medium-sized companies. Positive investment intentions were reported by companies in almost all sectors, with metal products and mechanical equipment manufacturers especially strong with balances of 35% and 25%.
Smaller companies were responsible for all of the growth in employment in Q3, with all sectors having posted positive employment balances. The rubber and plastics sector had the strongest positive balance at 30%.
Recruitment is expected to increase during the next quarter, with 16% of companies expecting to increase employment.