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

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 >>

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

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.

>>> View video: http://video.ft.com/v/821966229001/Creativity-at-heart-of-UK-manufacturing

According to Turner, chief economist for HSBC, we’ve got to do something different to what we’ve done in the past which has been far too reliant on consumers and governments who spend too much. He argues that the key to getting out of and staying out of recession is investment and exports and that means prioritising manufacturing. “Get it wrong this time,” he warns, “andwe’ll end up like Portugual buth without the good weather!”

Turner was setting the scene for an ‘Insider’ breakfast briefing on The New Manufacturing Agenda at South Yorkshire’s Advanced Manufacturing Research Centre. Speaking on the eve of the budget, he and fellow panelists Terry Scuoler (EEF), David O’Hara (MTL Group)and Brian McKenzie (Firth Rixon), argued that government has to create the infrastructure and environment for growth. In the absence of huge sums of government money, that means focusing on things like R&D tax credits, investment allowances, pushing the skills agenda and putting a balanced energy policy in place to secure the UK’s long term energy needs.

The push for renewables is understandable and it does represent opportunties, Turner argues, but nuclear  power has got to play a part in the UK’s long term energy strategy. If we don’t get the infrastructure online, we risk power outages in the next few years and the UK being at the mercy of ever rising oil prices. There’s also the danger that UK manufacturers will miss out on the opportunities in the nuclear energy sector. Emissions targets and regulation are creating a market but it would be completley ironic if the UK had to import technologies to meet those targets.

Turners also rails against what he sees as the domination of the education sytem by what he terms the ‘liberal arts mafia’ which values A level English higher than a qualified plumber! The serious point is that technical skills are completley undervalued in the UK while intellectual skills are overvalued. Terry Scuoler, UK chief executive of the Engineering Employers Federation, concurs: “There’s has been a big debate about increases in university tuition fees but that if one outcome is an increase int he proportion of people studying STEM-related courses, that may not be such a bad thing.”

Despite another oil crisis looming, a recent survey carried out by Deloitte show that mass adoption of electric vehicles (EVs) is still a distance away.  According to the survey, only 16 per cent of European consumers identify themselves as potential first movers, while 53 per cent say they might be willing to consider and 31 per cent say they are not likely to consider purchasing or leasing an EV.

Mass adoption of electric vehicles will be significantly influenced by a number of factors, including rising fuel prices, advancements in internal combustion engine vehicles, and the availability of government incentives. The survey shows that there is a tipping point in terms of fuel prices influencing consumer adoption of EVs. In addition, automakers will be challenged to price electric vehicles to meet the expectations of consumers while maximizing their margins.

For mass adoption, manufacturers will need to meet the challenge of pricing electric vehicles in line with consumer expectations, while still maximising their margins.  Consumers are not likely to want to pay a high price premium for EVs.  This means that incentives such as tax reductions and exemptions will be very important to the purchase decision.  Just like the Government supported the highly successful car scrappage scheme, they should now be turning their attention to electric vehicles.

However, a bright note for the UK is that it appears from our research that UK consumers are more willing to pay a premium for electric vehicles than their counterparts in other European countries. Manufacturers believe that it should be possible to achieve a range of nearly 300 miles, coupled with quick charging times of less than 10 minutes in the next three to five years time. Once this is achieved, we can expect to see a rapid take up of electric vehicles. It is possible that, as with the rapid adoption of diesel engine vehicles back in the early to mid nineties, we could expect to see up to 20% of all light vehicles  being electric within the next decade.

To review the report – click here – Gaining Traction

Blog from Jason Whitworth, partner and manufacturing expert based at BDO in Leeds

There’s no denying the region’s manufacturing businesses have had a tough time, but we are starting to see Yorkshire’s resilient nature pay off, as more companies report signs of improving demand and are looking to the future with greater confidence about prospects for recovery.

We have seen a larger than expected improvement in output and orders since the start of the year and Yorkshire’s manufacturing companies are starting to feel more confident and upbeat since the financial crisis began in mid-2007.

A number of risks to manufacturers’ prospects still remain and should not be overlooked. Not least uncertainty about how to repair the public finances, ongoing access to finance issues and the sustainability of recovery in export markets. As a result, I would expect to see investment intentions remain muted for a while to come.

Yorkshire manufacturers look to be making impressive gains in exports and it is hoped that the weakness of the pound enables further inroads to be made. In the short to medium term it is difficult to see significant growth in the developed nations of Europe, so as the new economic world order changes, manufacturers need to focus efforts towards high growth emerging markets.

We all need to remain vigilant of the environment in which we are operating, continuing to monitor the health of all major customers, identifying and acting if aged debts begin to mount, and reviewing the security of our supply chain. We also need to be thinking long-term in preparation for competition from a number of countries that will become economic powerhouses over the coming five years.

In terms of the recovery, manufacturers are considerably better placed to bounce back than other sectors that are more reliant on consumer spending to fuel their recovery. While I welcome George Osborne’s plan to protect manufacturers under a new corporation tax framework, there needs to be a clear strategy that rebalances the economy and encourages exporting. This means removing red tape, providing specific support to mid-market manufacturers and supporting emerging technologies, whilst not forgetting the UK’s traditional industrial base.

Manufacturing currently represents around 12 per cent of UK GDP. We need to get back to producing things and personally I would like to see manufacturing push it’s way back up towards 20 per cent of GDP with the right investment and support from the government. In the region, the manufacturing sector is 11 per cent of the total output per year, so any recovery in this sector will be a welcome positive sign that the economy is rebalancing.