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2009 Issues Archive
19 August 2009
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Manufacturers’ confidence returns
Confidence is growing among manufacturers that the worst of the recession is over and that orders and production levels will rise during the next year.
Surveys from accountancy firms revealed the surge last week while official figures showed the first European countries to emerge from recession had economies with strong manufacturing sectors.
The KPMG Business Outlook Survey, which covers 3,700 manufacturing companies in 11 European countries, revealed that more than 65% of UK firms believed there would be an improvement in business activity in the next year. The survey data showed a swing in the “net balance” from a low of +1.2 six months ago to +53.8 in July.
The survey uses net balance to show pessimism or optimism about the future on a scale from -100 to +100, with 0.00 being neutral.
UK manufacturers were also the most bullish regarding profits, with a net balance of +36 firms forecasting a rise in profits during the next year, an increase from the all time low of -10.5 registered in the winter about profit levels.
Alan Buckle, global head of advisory at KPMG, said: “There is plenty of reassurance to be taken from such a return to optimism among manufacturers. The UK and Italy lead the way in terms of sheer optimism.
“But before getting too carried away with talk of recovery, let us not forget we are still firmly rooted near the bottom of an economic cycle. The question now must be – are businesses properly prepared for the upswing which these figures hint at?”
The KPMG survey is of a broad cross-section of industry. Consultancy BDO Stoy Hayward’s survey, which covers the aerospace and defence, food manufacturing and distribution, automotive, engineering and technology sectors in the UK, also showed a return to confidence. Over 37% of manufacturers reported positive confidence levels about their businesses during the next six months. Only 14.7% were negative.
However, the survey revealed smaller companies with a turnover of less than £300 million in the engineering and metal products and technology sectors remained downbeat, with nearly 48% and 46% respectively expecting profit margins to fall in the next six months.
Tom Lawton, head of manufacturing at BDO Stoy Hayward said: “Manufacturers are having to work harder than ever to cope with the economic slowdown and issues such as falling sales and cashflow continue to weigh heavily on both large and small companies.”
Meanwhile, figures last week showed that the recession was over for two of Europe’s largest economies – Germany and France. German and French output grew by 0.3% in the second quarter of this year – the first growth since the beginning of 2008.
David Buik of BGC Partners said Germany and France would recover more quickly because of their prowess in exporting – contrasting with the UK’s emphasis on services and banking.
“If one ignores manufacturing output and industrial production, financial chickens come home to roost,” he said.
Official estimates in the UK showed output declining by 0.8% during the same period.
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© PE Publishing, 19 August 2009
