Manufacturing remains “subdued” after the fourth consecutive quarter, when a majority of firms saw output fall, according to new research.
A survey of almost 350 UK companies by the EEF found the main reason was the difficult world economy, ongoing effects of the cutback in oil and gas investment, and the steel crisis, as well as uncertainty from the referendum on European Union membership.
The forward-looking indicators are more positive for the second half, with manufacturers working on the assumption the UK will choose to stay in the EU, the report noted.
The EEF said there were “tentative” signs that manufacturing will emerge from the “trough” later this year, although the research revealed continued weakness of investment plans.
EEF chief economist Lee Hopley said: “Conditions in manufacturing at least seem to be heading in the right direction, but the climb back to growth is still being challenged by the sluggish global economy and subdued investment at home. Some sectors continue to buck this trend, however, with chemicals and the transport sectors continuing to show growth.
“Furthermore, signs that the massive issues facing the mechanical and metals sectors are bottoming out bode rather better for growth in the second half of the year. These expectations will need to be realised before an increase in investment plans follow suit.
“Assuming it’s a vote to remain, we expect manufacturing to remain broadly flat in 2016 for the second year running.”