fastening & assembly solutions and technology - Approved Business

OCTOBER 2011
VOLUME 15 NUMBER 4
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FAST (Fastening, Adhesives, Assembly &
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FAST October Comment
FAST OCTOBER 2011
Mixed messages from
a confusing summer
It’s been a summer of
much confusion; the economy
in turmoil, rioters in
the streets and the weather
determined to remain
unpredictable. And what
has become of the manufacturing
industries?
Mixed messages about
output and performance
have simply added to the cyclical confusion.
According to one survey, published jointly by
the manufacturers' organisation EEF and
accountancy firm BDO, Britain's manufacturers
are maintaining healthy growth despite the
uncertain economic outlook according to a
major survey published today. And despite
recent sentiment to the contrary, the
Manufacturing Outlook survey shows output
and orders still growing, with all sectors reporting
positive activity in the last three months.
Exports remain the main driver behind growth
with the gap between overseas and markets still
evident.
However, the report continues, as the economic
outlook has become more uncertain, a
divergence in views of recent trading conditions
and future expectations has opened up. A small
number of sectors, including metals and electronics,
have seen weaker orders intake over the
past three months, with corresponding concerns
about output expansion evident in the next three
months.
The balance between caution and optimism
appears to have shifted for small companies
looking at conditions over the next quarter,
where less visibility around future orders is
keeping confidence in check.
Tom Lawton, Head of Manufacturing at BDO
reckoned that this was a strong survey for the
manufacturing sector despite the economic
storm clouds looming in the Eurozone, the US
and the UK. The results were showing positive
balances in terms of orders and outputs in the
last quarter and expected in the next. Lawton did
note, however, the stark differences in expectations
between small and large companies, with
smaller companies seeming considerably less
secure about the future.
The economic turmoil in some industrialised
economies is a cause for concern amongst all
manufacturers. In particular, companies will be
worried about how their order books will look in
the coming months, as well as their prospects of
recovering debt on sales already made. But
whereas a large company may be in a better
position to offset losses, to a smaller company
the loss of an important customer can be a business
critical event. Smaller companies may feel
less confident about the future due to the relatively
short-term nature of their order profiles,
giving them less visibility over future orders.
Lawton points out that SMEs in Germany
have been the catalyst for German economic
growth. We should not forget how important
SMEs are for a strong economy and we should
ensure our smaller manufacturing companies are
given the support they require to thrive and continue
to be an active part of this sector. No one
can dispute this sentiment.
A report earlier in September from the BBC
suggested that UK manufacturing output shrank
in August, led by a sharp decline in export
orders. Another survey, this time based on purchasing
executives at over 600 firms, suggested
that things are not as breezy as the EEF survey
indicated.
The Markit produces a survey in conjunction
with the Chartered Institute of Purchasing and
Supply (CIPS) which measures growth by a
manufacturing purchasing managers' index
(PMI). The most survey showed that PMI fell to
49 in August – a 26-month low. Any level below
50 apparently implies contraction. According to
this survey, new export business, which drove
the recent manufacturing recovery, fell at its
fastest rate since May 2009. New orders and
employment also fell. Export demand had been
growing at close to record levels as recently as
December, according to past surveys. But
August also saw the sharpest fall in new orders
for the sector in two-and-a-half years, and the
first drop in output since 2009.
The CIPS survey highlighted the increasing
risk that the industrial sector – and perhaps even
the overall economy – is heading for the much
talked about double-dip.
So whose survey is right? Perhaps we are
being confused by figures derived from too
small a statistical sample so we don’t really
know if we are going into or coming out of yet
another recession.
Paul Gay, Editor
editor@fastmagazine.co.uk
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