Talking Point: Manufacturing into 2012
Terry Scuoler, chief executive of manufacturers' organisation EEF, gives his view on the sector while looking to the year ahead.
Never has the saying "what a difference a year makes" rung as true as it does as we enter 2012.
January 2010 pointed to a strong broad based industrial recovery that began at the end of 2009 continuing, with manufacturing accounting for over a quarter of economic growth.
For most of last year this was borne out as manufacturers outpaced the rest of the economy.
A competitive exchange rate and the opportunity to sell into fast growing markets overseas have helped but is far from the whole story.
As a result, we now have a much more competitive manufacturing sector, which increased has its productivity rise by almost 50 per cent over the last decade and increased its output per head by almost five times the economy overall over the past year.
Looking ahead to this year, the eurozone government debt and banking crisis has gathered pace, weakening many of our major export markets and leaving industry facing greater uncertainty. However, in spite of the risks ahead, we should not forget there are still areas of growth.
A number of sectors, including automotive, civil aerospace and mechanical equipment remain optimistic and have seen significant investment and expansion plans announced.
Looking across the world economy, emerging economies continue to post considerably stronger growth than our European neighbours.
Increasingly, we hear from manufacturers that they are making major inroads into these markets and this is backed up by trade statistics, which show that our exports to the BRIC economies have grown significantly since the beginning of 2009.
There is little doubt however that the first half of this year at the very least is going to be immensely challenging and policymakers and companies are likely to need to react quickly to changing circumstances. It is therefore vital that governments maintains a relentless focus on economic growth.
Projections are that close to 90 per cent of the growth in our economy will come from business investment. Given the economic outlook, many businesses will feel nervous about making major investment but past experience shows that this can be exactly the right time to steal a march on competitors by making a significant investment in new technology, innovation or plant and equipment.
With public finances under significant strain, there are clearly limits to what can be done on the fiscal front. But there is still much that can be done to help industry by ensuring that it is not exposed to unnecessary costs and regulation.
