Publishing its half-year ‘Economic Prospects’ report, the manufacturers’ organisation EEF says that it expects the UK economy to pick up momentum this year on the back of increased consumer spending. As a result, it is now forecasting GDP growth of 1.1% this year, up from 0.9%. Growth is then expected to steadily increase through 2014 to 1.8%.
While manufacturing is expected to contract this year by 0.7% due to a poor end to last year, output is expected to pick up in the second half of the year and expand by 1.9% next year. Continuing growth in exports, especially to non-EU markets which have grown 45% in the last four years, will be a source of growth for the sector along with recovering domestic demand.
However, EEF warned that any slowdown in world trade driven by weaker than expected activity in the US and China would have implications for some manufacturing sectors and, would continue the recent divergence in performance seen across the sector.
While a repeat of the job gains posted in 2012 may not be evident, the pace of job losses is expected to be “very modest” this year and next and, well below those seen in the decade leading up to the recession.
EEF chief economist Lee Hopley, said: “The events of the last few years have heavily impacted on manufacturing but we are now seeing far more positive signs that growth will pick up. With the UK economy beginning to move through the gears and, glimmers of hope in the Eurozone, this should translate into more broad based growth for manufacturing in the next few years.
“However, significant risks remain, particularly the continued failure of investment to show signs of life. We are still some way behind the previous peaks and, if we are to benefit from continued research, innovation and export growth then investment needs to pick up substantially. A failure to do so could see a build-up of problems in the supply chain and, our competitive position slipping.”
This material is protected by copyright Ken Hurst 2013.