Growth in British manufacturing and construction sectors – Oman Daily Observer

By Andy Jalil – Foreign Correspondent — THE first quarter of the year has seen a distinct rise in manufacturing and construction in the United Kingdom in a rapidly improving economic climate. Britain’s manufacturers coped well in adverse weather conditions earlier in the year to post their strongest annual growth for nearly three years, according to figures from the Office for National Statistics (ONS). With a better than expected start to the year, manufacturing expanded by 0.4 per cent over the month, leaving the sector’s annual rate of growth at 3.3 per cent — the highest since February 2011. But looking back to January — the wettest on record — the extraction of oil and gas in the North Sea proved to be extremely difficult, which meant that the country’s wider industrial production sector managed just 0.1 per cent growth.

Since then there has been much progress but despite the figures from the ONS, manufacturing output is almost 9 per cent below 2008’s pre-recession peak. Chief economist at financial data provider Markit, Chris Williamson, said: “With export markets picking up, domestic demand buoyed by a construction surge, rising business confidence and increasing consumer spending — as well as the Bank of England pledging to keep interest rates at record lows into 2015 — manufacturers are expecting a boom year.” UK manufacturers say they are increasingly bringing operations that they had outsourced to other countries back to Britain, re-shoring production to drive up quality and cut transportation costs. One in six respondents to a new survey said they have re-shored part of their production chain in the past three years, bringing processes, which had been outsourced, to the UK, according to manufacturing group Engineering Employers Federation (EEF) and law firm Squire Sanders. Chief Economist of EEF, Terry Scuoler, said: “The continued erosion of low labour costs in some competitor countries means that in many cases it makes increasingly sound sense. It is now key that government policy supports the most competitive business environment possible.”

More than half of small and medium-sized manufacturers said that improved input quality was a major driving force decisions to re-shore some operations, with more certainty on delivery times and reducing logistical costs a greater concern for big businesses. The growth in manufacturing is driving the sharpest rate of jobs creation in the sector for almost three years, according to the Chartered Institute of Purchasing and Supply (CIPS). Its latest snapshot of manufacturing fortunes showed the pace of overall growth accelerating last month with companies taking on staff to meet rising workloads at the fastest rate since May 2011. CIPS’s purchasing managers index (PMI), where a score over 50 indicates growth, rose from 56.6 to 56.9 last month, driven by a strengthening domestic market as well as an encouraging increase in new product launches and investment in new machinery.

Manufacturers managed to grow at a faster pace despite the pressure of a rising pound dampening growth in export orders. CIPS Chief Executive, David Noble said British manufacturers had been “remarkably resilient”. He added: “Overseas demand, despite remaining elevated, lost some of its impetus, with exchange rate fluctuations playing a part.” The EEF and other business organisations such as the Confederation of British Industries (CBI) warned that ministers need to take more action to support the manufacturing bounce-back. EEF Chief Economist, Lee Hopley said: “It is now vital government does all it can to underpin support for companies giving manufacturers confidence to fulfil investment and recruitment plans.” UK’s construction sector is also finding activity at its highest level in five years. Despite terrible weather earlier in the year, companies reported only a minor slowdown in the rapid expansion. Most recent PMI from Markit and the CIPS was 62.6 for construction sector. The figure is down from 64.6 at the start of the year but still far above the normal 50 mark, suggesting growth is strong.

Howard Archer of IHS Global Insight said: “In fact, this is still a very strong survey even if activity had not been affected at all by the wet weather and flooding.” Expectations for the months ahead are still very strong, especially in comparison to last year’s. Only a tenth of construction firms now forecast that output will decline over the year ahead, in comparison to 59 per cent projecting an increase. The workforce in the construction industry is also expanding at the fastest rate since 2009.

— AndyJalil@aol.com