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UK MANUFACTURING SECTOR FACING SERIOUS HEADWINDS

11-09-2015
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The EEF, a lobby group for UK engineering and manufacturing, has slashed its growth forecast by more than 50 percent for Britain’s manufacturing sector this year.

The organisation, which conducted research alongside law firm DLA Piper, said its latest findings prompted it to revise its manufacturing growth projection from 1.5% to 0.7% for the year.

EEF says the UK manufacturing sector faces a "rollercoaster of risks" as a global slowdown takes its toll on British firms.

“Bright spots provided by domestic consumer demand and construction activity are not enough to hold the shadow of global factors at bay,” the group said in a recent report.

The big problems are China’s cooling economy and recent stock market turmoil, Greece’s debt crisis, and uncertainty in Europe, with the ECB recently cutting its growth forecasts.

All three are either directly weakening demand or indirectly hitting it by reducing business’ willingness to take risks right now.

UK manufacturers’ output shrank by 2% in the second quarter, the worst performance since 2009. Exports are also at a 6-year low.

Lee Hopley, chief economist at the EEF, said: "We've seen the future of the Eurozone on the line once again, turbulence and uncertainty over China and Greece and, of course, oil and gas are still a concern. Against this backdrop it's no surprise that confidence is faltering and UK manufacturers are feeling less optimistic about their growth prospects for next year."

However, the Manufacturing Outlook survey did discover two important exceptions as part of its findings.

Manufacturers' investment and recruitment intentions, for example, are both "hanging onto positive ground", according to the EEF.

The research revealed a net 6% of companies were looking to hire during the next financial quarter and 2% of manufacturers were hoping to hike investment.

Richard May, head of the manufacturing sector at DLA Piper, added: "As we start to edge towards the end of the year the outlook for the UK manufacturing sector is somewhat bleaker than at the beginning of 2015.

"The impact of an increasingly globalised economy, and of course manufacturing sector, is taking its toll as a result of recent turmoil in Europe and Asia and as concerns about global growth are mounting. Having said that, UK manufacturers are not battening down the hatches yet as, whilst business confidence has dipped, it does remain positive looking ahead. We can remain hopeful that prospects for the sector will pick up again."

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