Manufacturers plan recruitment boom as recovery becomes more entrenched

http://www.theguardian.com/business/2014/mar/17/manufacturers-recruitment-recovery-eurozone-osborne

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Manufacturers are planning to hire workers at the fastest rate in more than a decade in the coming months, as recovery in Britain's factories becomes more firmly entrenched, giving the chancellor, George Osborne, some positive news before Wednesday's budget.

Improving economic conditions in the eurozone – Britain's largest trading partner – and rising consumer demand drove output and orders higher in the first quarter of the year, fuelling optimism, according to a survey by manufacturing trade body EEF and accountancy firm BDO.

Against a stronger economic backdrop, a balance of 31% of companies said they planned to take on more staff in the next three months, which is the highest level since the measure was first included in 2000. Hiring intentions were strongest among electrical and car manufacturers.

A balance of 34% of businesses said they planned to increase investment in the coming quarter, also a record high.

EEF urged the chancellor to use the budget to create the best possible business backdrop to ensure that positive intentions translated into action.

EEF's chief economist, Lee Hopley, said: "This is the most positive set of indicators we have seen for some time, demonstrating that we've not just turned the corner, we're actively heading down the right road.

"Manufacturers are clearly feeling more confident as their order books fill up and exports are strong. It is now vital that government does all that it can to underpin support for companies, giving manufacturers the confidence to fulfil their investment and recruitment plans."

The survey reflected a more broad-based recovery taking hold in manufacturing, with a strong outlook across all regions and sectors. Manufacturing output fell by 0.6% in 2013, but on a quarter-on-quarter basis the sector looked in better shape, with output up 0.7% between October and December, according to the Office for National Statistics (ONS). EEF is predicting 2.7% manufacturing growth in 2014 and 2.6% for the wider economy.

Factories reported a stronger than expected rise in export orders in the early months of 2014, according to EEF/BDO. Hopley said this suggested UK factories were starting to see the benefits of modest improvement in the eurozone.

Official figures have painted a weaker picture of UK exports, which fell 4% to a 19-month low of £24.2bn in January, the ONS said.

UK exports have been flat since mid-2011, marking little progress in Osborne's wish, outlined in 2012, to double the value of UK exports to £1tn by 2020.

Hopley said the results of the survey suggested stronger exports could start feeding through to the official data in the coming months.

"The profile of the economy will remain a concern until we see investment and exports contributing a greater share of growth," she said.

Meanwhile, businesses want to see budget measures that will increase government investment and put more money into people's pockets, according to a survey of executives at 161 medium-sized firms by KPMG.

Reducing the national insurance contribution was the most popular measure the executives wanted, followed by an increase in the threshold for the 40% personal tax rate and increased tax relief for investment in machinery, premises and technology.

The TUC called for the chancellor to introduce measures to address a near-£50bn investment gap between current levels and those forecast by the Office for Budget Responsibility.

But Ernst & Young warned there was little room for major giveaways in the budget, with the OBR's revised growth forecasts expected to show little change, giving Osborne only "small change" in his war chest.