SW manufacturers say recession bottoming out

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There are signs that the impact of the recession on manufacturing in the south west England beginning to stabilise.

While the latest survey from EEF, the manufacturers’ organisation, shows a further decline in overall output, 21% of businesses do report an increase in new domestic orders and there appears to be a slight improvement in cashflow and a greater willingness to invest in capital expenditure.

Manufacturers in the south west also expect a slight improvement in trading conditions in the next three months and the region remains the most stable of any in Britain in terms of employment.

“Overall, the effects of the recession appear to be levelling out,” said Clive Turner, external affairs advisor for EEF South West Region. 

“The weakness in world markets has hit the sector hard, but it looks like manufacturers are now close to the bottom of the cycle.  However, big question marks remain about when we will see any substantive signs of a recovery in demand.”

Key results

Over half of south west manufacturers reported lower total output in the last three months

There was slight improvement in new UK orders, with 21% reporting an

increase, but new overseas orders worsened overall

Although jobs continue to be lost, the south west is the most stable for employment of any region in Britain, with around seven in 10 respondents reporting no change or gains in numbers employed

Price cutting picks up and margins squeeze continues

Forecasts show a return to growth in 2010.

Turner added: “While there may be some brighter spots on the horizon, the Government cannot afford to think its work is done and lose focus on the economy.  While companies are preparing for the upturn, government and the Bank of England need to ensure they can access the support they need from banks and credit insurers.”

Looking to the next three months, almost all sectors are less pessimistic about output and orders from both domestic and overseas customers. In the south west, a balance of 14% of companies expects further output falls next quarter, compared with 27% in the first quarter.

Looking forward to the rest of this year and next, although the outlook has stabilised, the sharp fall in activity in 2009 Q1 has led EEF to downgrade growth forecasts for 2009. It expects manufacturing output to fall by 11% in 2009, in which a return to growth in 2009q4 precedes a modest recovery of 0.4% growth in 2010. Engineering output is forecast to decline by 17.5% this year and by 0.8% next year.

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