Manufacturers most upbeat as recovery gets under way

THE economic recovery is under way, with the number of optimists outweighing pessimists by five to one, a survey suggests today.

According to the KPMG Global Business Outlook, UK manufacturers are more upbeat than firms operating in the service sector, and are the most optimistic in the European Union.

The study, which was compiled by research firm Markit for the accountancy giant, shows strong levels of optimism around key measures such as business activity, revenues and profits, particularly in the manufacturing sector.

More than two-thirds of British manufacturers expect to be busier in the next 12 months compared with just over one in ten who forecast a drop in activity levels, giving a net balance of +58, an increase of eight on last autumn's survey. In January 2009, that figure hit an all-time low of +1.

The survey is one of the most comprehensive to be produced, pulling together the opinions of 11,000 manufacturers and service providers in 17 nations, including the UK, US, China and India.

Commenting on the findings, Craig Anderson, senior partner for KPMG in Scotland, said: "The UK manufacturing numbers are as reassuring as we could have hoped for at this stage of the recovery.

"The continuing competitiveness of sterling-based businesses has doubtlessly aided this export-led sector and contributed to the optimism present.

"That said, there remains an element of fragility about this recovery and this will not be helped in the short term by the uncertainty which inevitably surfaces as we head into an election period."

Other recent surveys have painted a mixed picture of the economy. However, some analysts believe that a further revision of fourth-quarter GDP data, due out tomorrow, could show that Britain exited 2009 with a little more momentum than was previously thought.

Howard Archer, chief European and UK economist at forecasting group IHS Global Insight, is predicting an upgrade to 0.4 per cent quarter-on-quarter growth.

The official figure has already been raised to 0.3 per cent from an initial estimate of just 0.1 per cent GDP expansion, hauling the economy out of recession.

Archer said: "We maintain the view that the recovery will be bumpy and gradual for some time."