As a result, firms expect production to fall over the coming quarter, according to the CBI’s latest monthly industrial trends survey.

Of the 434 manufacturers who responded, 18% reported total order books to be above normal, while 41% said that they were below.

The resulting survey balance of -23% is the lowest since October 2010 (-28%).

Export demand also remained depressed with 44% saying export order books were below normal expectations.

In line with weakened order books, manufacturers expect to reduce production over the next three months, the research found.

Ian McCafferty, CBI chief economic adviser, said: “Conditions in the UK manufacturing sector remain difficult, with demand both at home and abroad subdued. The weaker export performance no doubt reflects on-going instability in the Euro area, our biggest export market, and its knock-on impact on prospects for the real economy.

“A clear and orderly resolution to the crisis remains essential to prevent further adverse effects on both UK manufacturing and the wider economy, and to lift business confidence.”

Published with permission of TheBusinessDesk.com

Of 470 manufacturers surveyed, 22% described total orders as above normal, and 31% said they were below. The CBI says the resulting balance of -9% indicates order book levels slipped back in September, though this measure remains well above its long-term average of -18%.

The news comes as Leeds manufacturers report a rush of new business wins and investment, and will be welcomed following the announcement by defence giant BAE that it is to cut nearly 900 jobs at its manufacturing plant in East Yorkshire.

Allied Glass, manufacturer of glass containers for the premium spirits industry including leading brands such as Diageo, Chivas and William Grant & Sons, is investing millions in new machinery and staff as its new management team prepares to conquer new markets in Europe and further afield.

The Leeds-based business went through a secondary management buyout a year ago in a deal valuing the manufacturer at £75m.

Managing director Alan Henderson sees diversification into Europe as “a key part of the growth” of the business, which is backed by the private equity arm of Barclays Bank.

In an interview with the Yorkshire Post, Mr Henderson said that Allied wants to win new work in France, Italy, Spain and Poland: “We are targeting key brands that we want to be associated with and know we can do a good job for,” he said.

Allied has hired 30 people to staff a new facility in Leeds in a £600,000 investment to create a new operation decorating bottles.

Meanwhile, textile manufacturer Hainsworth has won a contract to kit out 2,000 firefighters across the West Midlands’ 39 community fire stations. The company already makes protective fabrics used by firefighters across the UK as well as in the US, Europe and the Middle East.

Now West Midlands Fire Service is to buy Hainsworth’s TITAN kit – a patented double cloth combining flame retardant properties on the face and high strength fabric on the back, resulting in increased thermal protection.

The eight-year contract will see the state-of-the-art kit rolled out to all firefighters in the West Midlands. The uniform, in dark blue and red, replaces the magma coloured uniforms previously worn by the service. The new kit will be manufactured by Bristol Uniforms.

And specialist brewery engineering firm Microdat has followed up a £500,000 equity investment from Finance Yorkshire with news of £5 million worth of orders for its innovative cask and keg handling systems which are being installed in breweries across the UK

The survey shows that almost half of companies have redesigned products or processes in response to rising materials prices and 40% admitted to substituting some inputs with cheaper alternatives. Nearly two-thirds of companies have sought different sourcing options with just over 4 in 10 looking to renegotiate existing contracts with customers.

EEF director for Yorkshire and Humber Andy Tuscher said: “This is a stark illustration of the impact of high material costs which manufacturers have been grappling with throughout the recovery. However, whilst most attention is focused on the inflationary aspects of these costs, the flipside is another story of the extent to which companies are finding innovative solutions to deal with them.

“What is clear from our survey is that there is not a simple equation for managing rising and volatile materials costs. Manufacturers have so far deftly navigated the issue using the internal tools available and being agile in managing customer relations and procurement strategies. And this is an issue that companies are saying they will be keeping a close eye on in the months ahead.”

The survey suggests that commodity prices are likely to remain volatile and that most manufacturers will be forced to build further price increases into their business plans.

Read the full survey here >>

The survey shows output and orders balances turned out as strong as expected in the last quarter, marking the sixth consecutive quarter of growth. And following a jump in the number of vacancies in manufacturing in the official figures companies across the country continues to recruit over the past three months. Alongside the positive investment intentions, the survey indicates a further gradual improvement in confidence.

Over the last six months, when the economy as a whole stagnated, manufacturing grew by 2.3%. Since the recovery began, despite only accounting for around 13% of the economy, manufacturing has been responsible for one third of economic growth. Even in the first quarter of 2011, where the industry’s growth rate slowed a little, manufacturing accounted for approximately one quarter of total economic growth.

However, the ability of manufacturers to manage the volatility of input costs is now a greater concern, with signs that fewer companies, particularly in consumer facing sectors, are able to pass on price rises with pressure on profit margins returning.

Read more about the EEF’s Manufactuirng Outlook survey.

The fast growing international company is aiming for its UK operation, based at Sherburn Enterprise Park near Leeds, to grow to a turnover of £10m within two years.

From its Yorkshire base Power Link is looking to establish itself as a European leader in the manufacture and distribution of diesel power generation sets. The business already employs more than 400 people in its Shanghai factory.

Sophie Han, general manager, Power Link Machine UK, said: “This investment in our European operation is a significant step for the business and will enable us to pursue further European and international opportunities.”

The news follows the announcement last month that Mitsubishi Power Systems Europe (MPSE) had acquired a 35,000 sf ft unit at Navigation Park , Leeds, which it will use for its expanded service and parts facility.

Power generation, service and maintenance firm MPSE was established in 2007 and employs more than 500 staff in eight offices across Europe. The company is involved in the design and procurement of gas and steam turbines as well as developing advanced energy generation in both the solar and wind powered sectors.

Juergen Richter, service director in the Leeds centre, said: “The acquisition of this property will assist us in the expansion of our business and enables us to respond effectively to the needs of both our existing and future clients.

“With the ever growing requirement to source more efficient means of power generation MPSE needs to be able to offer our customers innovative alternatives for power generation as well as increased level of service and shorter response time.”

Siemens has also made a £1.2 million investment in its mechanical drives division, opening a new Leeds plant at Navigation Park at the beginning of the year. The move is designed to enable the £15m operation handle additional and bigger contracts, including work to support the group’s planned major offshore wind turbine manufacturing plant in Hull.

While the skills gap and over-regulation present continuing problems for manufacturing companies, management from firms including Mitsubishi Power Systems Europe, Group Rhodes, Thorite, LBBC and Airedale International all said that market conditions are improving and they are focused on taking advantage of growing opportunities.

Leeds Manufacturers: Surviving and Thriving in a Competitive Environment was organised by Leeds Manufacturing in partnership with sponsors Santander Corporate Banking, Clarion Solicitors and Deloitte, who hosted the breakfast at its offices at No 1 City Square in Leeds city centre.

Speakers at the event included Leeds City Council chief executive Tom Riordan, Andy Tuscher from EEF, managing director of LBBC Howard Pickard and Airedale International’s managing director Clive Parkman.

Riordan told manufacturers that they have a bigger role than ever to play in the success of the region, particularly with the launch of the local enterprise partnership.

He said: “We are at the start of a new era in which business and economic growth will be self-starting and business-led. The message from the LEP is to lose the politics and concentrate on jobs and investment.

“Let’s do some myth-busting: manufacturing makes a major contribution to the economy of Leeds and the wider city region and is critically important for the economy going forward.”

>>> Read the full report on Leeds manufacturers: surviving and thriving on The BusinessDesk.com

Cook says the new investment will increase capacity in volume and breadth and also enhance the group’s ability to recycle materials. He plans to expand the workforce from 700 to 850 with new jobs for welders, machinists, pattern makers, engineers, moulders and finishing operators at his three sites in Sheffield and Leeds.

Growth is being driven by high demand from the international oil and gas, transport and construction markets as the global economy bounces back after the financial crisis and customers return to producers in the developed world. The low value of the pound is also helping, says Cook, adding that the company intends to ‘move with the times’, investing in people and plant to develop world class manufacturing facilities.

Read full interview>>> Global demand sees William Cook plan £5m site investment

MAS Y&H provides hands-on advice and support to manufacturing businesses to improve productivity and efficiency. It is jointly funded by Yorkshire Forward and the European Regional Development Fund (ERDF) and is managed by YFM Business Development, managed by YFM Business Development (YFM BD), part of the enterprise development company GLE Group.

Last October, the future of the MAS service in the region was thrown into disarray when Yorkshire Forward withdrew its funding for any new projects.

Since then, MAS Y&H has continued to operate although, in the words of Robin Watson, MAS regional director: “it has been an extremely frustrating period as we have not been able to provide the in-depth expert advice manufacturers are seeking.”

Robin and his team have succeeded in securing a further £1m funding which gives MAS Y&H the ‘green light’ to carry on operating until the end of the year. The funding will allow…

Watson said: “The MAS service can lead to real and lasting benefits for businesses, including safeguarding and creating new jobs and increasing turnover and profitability by helping to improve competitiveness, enabling new business to be won. Now we have the funding in place, one of our priorities will be to advise on operational issues including introducing ‘Lean’ techniques and revising factory processes and layout “

He added: “From December, the MAS service will be delivered on a national basis. The GLE team are seeking to play a role in the new contract so that we can continue to use our experience and knowledge of manufacturing improvement techniques, which we have built up over the past eight years of delivering the MAS service in Yorkshire & Humber.”

For more information about MAS visit: www.mas-yh.co.uk

The number of manufacturing companies falling into administration in the first quarter of this year declined by 18 per cent to 86 compared with 105 in the same period last year, according to research by Deloitte, the business advisory firm. 

David Raistrick, UK manufacturing industry leader based at Deloitte in Leeds, comments:

“The manufacturing sector has shown positive signs of recovery, over the past 12 months and this reflects a healthier industry. Orders picked up throughout last year, driven by a recovery in end demand. The 20 per cent decline in sterling against the euro has undoubtedly helped to give a much needed boost to exports in the sector.  There were fewer administrations in this sector in 2010 than in any of the previous three years.

“This trend is encouraging but the Q1 2011 figures lend a note of caution to this optimism.  The number of administrations in Q1 2011 is higher than the previous three quarters in 2010 possibly indicating that demand is softening. This, combined with recent data on purchase orders is less encouraging, and we cannot preclude a further rebound in these figures if the recovery in demand is not sustained,” said Raistrick.