Prospects gloomy for north-east firms as hard times hit global economy

The EEF's Liz Mayes
The EEF's Liz Mayes

North-east manufacturers are enduring a difficult end to the year because of hard times hitting the global economy, according to the latest manufacturing outlook survey from the EEF (Engineering Employers’ Federation) and international law firm DLA Piper.

The survey shows further deterioration in most key indicators confirming that, after growth in 2014, industry has taken a step back.

The gloomy outlook has prompted the first negative forecast for employment and investment in almost six years, a trend expected to affect manufacturers in the north east as much as those elsewhere.

Output and orders are suffering in the region. This quarter, half of firms have seen output decrease, with similar numbers expecting the same in the first quarter of 2016.

Some 44 per cent of firms have seen orders drop this quarter, with 35 per cent expecting more of the same in the first three months of 2016.

Investment and recruitment intentions have both turned negative for the first time since 2010.

Employment, in particular, has been affected by the build-up of spare capacity in sectors supplying oil and gas, and job losses in the steel industry have impacted on prospects for the metals sector.

The EEF has revised its growth forecasts down for this year and next.

Manufacturing is forecast to contract by -0.1 per cent this year and recover slightly to grow by 0.8 per cent in 2016.

The EEF is forecasting gross domestic product growth of 2.4 per cent for 2015 and 2.1 per cent in 2016.

EEF regional director Liz Mayes said: “The prospect of manufacturing growth this year has all but faded away with another disappointing set of indicators from our survey.

“The downbeat mood may not be universal across all industry sectors, but in the face of mounting challenges, it seems to be spreading, and companies in the north east are certainly not immune.

“The impact on manufacturers’ employment and investment plans suggests that these clouds will be hanging over us as we go into next year.

“While Chancellor George Osborne’s recent spending review will have been seen as supportive to industry, it is critical that the Government continues to act to ensure that the UK is a competitive location for manufacturing.”

Richard May, head of the manufacturing sector at DLA Piper, added: “As the year draws to a close, the results of the survey show that it has undoubtedly been a very challenging one for manufacturers.

“The contraction of the sector in 2015 appears to have been a real blow to confidence, and the outlook for next year is also rather gloomy.

“While it is disheartening, it’s not all bad news, with the consumer-facing sectors performing well in the UK and abroad.

“Let’s hope that 2016 turns out to be a more stable year globally and the manufacturing sector gets a chance to recover.”