Q4 Manufacturing Outlook survey published by EEF, the manufacturers’ organisation, and accountancy firm BDO, said the final quarter of 2016 offered signs of recovery. Tony McDonough reports.

North West manufactures are seeing an upturn in output and orders after a “sluggish” 18 months, a new study shows.

The Q4 Manufacturing Outlook survey published by EEF, the manufacturers’ organisation, and accountancy firm BDO, said the final quarter of 2016 offered signs of recovery.

It pointed to early signs that the sector has left behind the negative effects of the low oil price and concerns about global growth and is now seeing opportunities from a resilient UK market and brightening export prospects.

Risks ahead

While key indicators moving back into the black is a positive development, EEF added that risks remain on the horizon, some Brexit related and others potentially stemming from elsewhere in the world.

As a result, despite the improvement in conditions, EEF is still forecasting that manufacturing will contract in 2017.

It also pointed to inflationary pressures building and significant price rises in the pipeline, a factor likely to weigh down on domestic activity in the year ahead.

Profit margins are also under considerable pressure and are likely to be squeezed further in 2017.

Strong forecast

According to the survey output in the North West in the last three months increased by a balance of +42%, the second highest of any UK region, with a similarly strong forecast for the next three months.

New orders for the next three months are also the highest of any UK region at +5% while, in line with this better picture, more companies across the region are planning to increase employment.

According to EEF the North West continues to benefit from the strong performance of the Aerospace and Automotive sectors which is feeding down through the supply chain.

Steve Warren, EEF region director in the North West, said: “This is the most upbeat reading on the state of manufacturing we’ve seen for some 18 months and signals the start of brightening conditions, which had been briefly knocked off course following the referendum.

“This anticipated turnaround can be attributed to a range of factors including the resilience, thus far, of the UK economy but also the strengthening of demand in a number of major markets.

“While confidence is back on the up, manufacturers are still cognisant of growth challenges in the near term.

“Brexit aside, global growth is not yet on the firmest of footings and, with volatile exchange rates also in the mix, UK manufacturers will need to continue to be nimble in their responses to emerging challenges and opportunities in the months ahead.”