Industrial Output and Property Investment on the Rise

Posted on 25 November, 2013 by Kirsten Kennedy

British manufacturing firms are enjoying a boom period following years of recession, with both domestic and overseas demand leading to strong job creation within the sector. In fact, growth in the manufacturing industry is only outstripped by that in the services sector, which is impressive given the latter’s advantages in terms of size and range.

According to the Confederation of British Industry (CBI)’s latest survey, manufacturing has once again grown in October with the result that factory output has reached highs not seen since March 1995. Mechanical engineering played a huge role in this, with orders now at their highest peak since records began in 1978, yet it cannot take sole credit as 13 out of the 15 sub-sectors under the industry bracket also reported an increase in orders.

In fact, only electrical engineering reported a decline, meaning that growth remains fairly widespread throughout the manufacturing industry.

Director of economics at the CBI, Stephen Gifford, points out that the results from October are not an isolated case as output volumes in the quarter to November climbed at the fastest rate in 18 years. The last time this level of quarterly growth was seen was in January of 1995 – two months before the previous monthly peak in March.

He says; “This new evidence shows encouraging signs of a broadening and deepening recovery.”

The survey, which took into account the business activity of 350 UK manufacturers, found that 36 per cent of respondents reported a higher than average level of activity in October’s order books. Although 25 per cent admittedly reported a decline, the resulting 11 per cent growth is a marked improvement on the 4 per cent decline reported in May of this year.

Furthermore, as the long term average equates to a decline of 17 per cent, last month’s figures indicate that recovery is truly beginning to take hold in the industry. Economists now judge annual manufacturing output growth to amount to 6 per cent, which is extremely positive news given the struggles faced by SMEs in the industry over the past few years.

However, Mr Gifford warned against complacency as a result of October’s figures, as he believes “challenges remain” within manufacturing. These challenges largely centre around government support in helping UK exporters access high growth export markets, as he believes this will “reduce their vulnerability to any further Eurozone flare-ups.”

The survey results goes some way to explain the increasing amounts of capital flowing into the European industrial and logistics property markets.  According to figures published today, investment volumes rose by 4.6 per cent in the third quarter of 2013. This is a 40 per cent rise on the same period last year, suggesting that investors are confident the economic recovery will be a sustained one.

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