Despite disappointing news more generally about world economic growth and trade, UK mechanical engineering’s reasonable start to 2016 was maintained in February according to the Engineering and Machinery Alliance’s (EAMA) Business Monitor.
Martin Walder, EAMA chairman: “Enquiries maintained a healthy positive balance so that the overall impression is that this year could be starting on an upward curve with the three month running averages for our lead indicators quite well ahead of the position last year. Weaker Sterling could be helping but we are certainly not there yet and need to see export orders improve.
“UK order levels also came quite out well with the monthly balance positive as well as the three month running average. Again it was the export order levels that disappointed, as they have been doing over the last 12 months in the Monitor.
“When the euro is at €1.25 to the Pound Sterling the exchange rates is near enough in neutral territory. Current rates are coming very near and should enable UK based businesses to quote very competitively for export, so I’m looking for improvement in that area.
“Investment activity has fallen back, with a fifth of firms (19%) saying they are investing in skills and training and not in plant. Indeed this month only 24% of firms reported investment in all areas, that’s the lowest monthly figure on that measure in three years. This change seems to be too abrupt a decline to be solely linked to the changes in the Annual Investment Allowance which from January 1st was halved. Nonetheless it’s certainly markedly lower than the levels recorded by the Monitor in the first three Quarters of last year.
“Access to finance improved but the cohorts noticing the improvements are small, with firms supplying into sectors that are reportedly very busy reporting access easier both for working and for investment finance.
“Confidence remains suppressed. There are lots of factors creating hurdles that have to be crossed in the near future with many coming together within a few months such as automatic enrolment for pension, the living wage and the EU Referendum. And while the Monitor reflects business activities transacted in February, the confidence question is the last one and as a result reflects views formed in March, and in some cases well into the month.”