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Industry sector is on road to recovery

Britain's manufacturers continue to defy the sluggish nature of the economic recovery, with a growing number of companies enjoying buoyant trading conditions over the past three months.

Manufacturing organisation, the EEF, and accountancy firm BDO said their joint research showed that many manufacturers were seeing encouraging rises in demand from overseas markets, as well as a lift from domestic firms.

A report published by the EEF and BDO today suggests that the manufacturing sector's recovery is gathering pace more speedily than other parts of the economy.

For the first time since the recession, more manufacturers now intend to recruit staff than not over the next three months, though there is some caution about capital investment plans, with many companies remaining nervous about the sustainability of higher demand and also the possibility of negative changes to the tax regime, with an emergency budget due in a fortnight's time.

However, a majority of firms remain positive about the outlook for the future, with a balance of 22% firms expecting higher output, and 20% expecting increased orders. The report forecast that the manufacturing sector would grow by 3.5% both this year and next - well ahead of the rest of the economy.

A similar phenomenon has been seen following previous recessions, but the growth will encourage those who hope that the UK economy can be rebalanced, with less dependence on the services sector particularly financial services.

"The steadily improving trends in manufacturing look set to continue in the coming months, and the upswing is being felt right across industry - manufacturers are pulling in more export orders on the back of a recovering world economy, and a better outlook for the domestic market is giving companies some confidence to recruit again," said the EEF's chief economist, Lee Hopley.

"But manufacturers are very aware that economic headwinds could still pick up again ... Great importance is now being placed on the need to rebalance the UK economy. In the short term, this requires a budget that delivers tax reform and deficit reduction."