European manufacturing on the rise

It was roughly 12 months ago that manufacturing SMEs were dauntingly described as potential economic saviours by market and financial analysts. Not bad for a part of the economy that had been seen as the poor relation to the superpowers of finance and the service sector for years. It hasn’t been exactly plain sailing, but it is fair to say manufacturers across the UK have done their fair share to live up to the challenge.

The Guardian manufacturing barometer reinforces this belief. Designed to gauge the temperature of SME confidence across England, the latest report paints a positive picture when it comes to sales, growth, investment and job creation.

Taking a closer look at the figures makes for interesting reading. Out of the 700 companies questioned, nearly half (47%) reported a positive rise in turnover (4% up on last quarter), while 93% were looking to take staff on or keep workforce levels the same. Interestingly, good news for manufacturing is not confined to the UK. Spain, undoubtedly one of the worst effected major Euro zone economies, has had encouraging news as well. The PMI (Markit’s survey of output across the sector) rose to 48.1 in May – a two-year high. Particularly encouraging for both countries was the marked increase in demand within the much coveted international export market.

In relation to specific sectors, food and drink production grew particularly strongly, while output at Britain’s textile and clothing factories rose at their fastest rate in more than two years. Stronger demand from North America, East Asia, Russia, Germany and France supported British exports, where demands for British motor vehicles were at their highest level since March 2012.

Chris Williamson, chief economist at Markit, said the data suggested the rise in domestic demand was partly due to the Bangladesh clothing factory disaster that killed more than 1,000 workers in April. “The upturn was only evident in the domestic market, so that could suggest more people were seeking out UK-based clothing suppliers,” he said.

The increases are particularly significant politically as the coalition government has made much of its desire to re-balance the British economy. While today’s figures may represent a tentative beginning to that enterprise, it is important to remember that the recovery in British manufacturing is fragile at best. UK factory output contracted 0.3 per cent in the first three months of the year and has been a seen as an impediment to positive growth figures for much of the past couple of years. Moreover, manufacturing in its totality, still comprises a mere 11 per cent of UK economic output.

Sources include: The Guardian and the Daily Telegraph

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