EEF dispels gloom, with output and orders rising

British manufacturing is holding up surprisingly well, according to a survey by the manufacturers' organisation EEF.

The latest EEF business trends study shows output and orders growing in the past three months, driven by exports.

Of companies surveyed, 18 per cent plan to increase their capital investment over the coming year, unchanged from the previous quarter, while 20 per cent have increased recruitment, continuing a strong hiring trend that began in the second quarter of 2010. Car makers and the rest of the transport sector reported healthy export balances. Mechanical equipment output and orders continued to hold up well too. The EEF forecasts growth for the manufacturing sector as a whole of 2.8 per cent in 2011, with positive output expectations across all regions.

Lee Hopley, the EEF's chief economist, said: "Manufacturers have bucked other recent negative indicators, holding out hope that the recovery has not yet run out of steam. Across much of the sector companies are still busy and orders are holding up, particularly from overseas markets."

The EEF's findings contradict last week's gloomy Markit/CIPS survey, which pointed to a contraction in UK manufacturing in August.

The survey does indicate some areas of fragility, with metals and electronics manufacturers experiencing weaker orders. There is also a divergence according to size, with smaller manufacturers more cautious on prospects for expansion.

Tom Lawton, the head of manufacturing at the accounting firm BDO, which compiles the Business Trends report in conjunction with EEF, said: "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."