Is UK manufacturing coming out of recession?

May 16 2002 by Brian Amble Print This Article

Despite recent press reports suggesting the manufacturing industry is coming out of its recession, a recent survey shows that managers are still cautious in their predictions.

This is according to the results of the latest Recruitment Confidence Index (RCI) - a quarterly survey of UK directors' and managers' expectations of changes in recruitment activity and business conditions in the next six months.

The survey is produced by Cranfield School of Management and the Daily Telegraph in association with People Management.

Although predictions indicate that more people are likely to be employed in the manufacturing sector during the next six months, the sudden good news has not been widely accepted as time to celebrate.

For example, there are also more manufacturing organisations that are offering no pay increases overall in the next six months.

Professor Shaun Tyson of Cranfield School of Management said: "The Spring RCI figures indicate cautious optimism in manufacturing for the first time in many months.

"This optimism is a reflection of managers' expectations for the future, perhaps fuelled by a recovery in the USA and the feeling that the worst aspects of last year's crises are over."

Despite the return of business confidence in the manufacturing sector and demand for their main products, it is still a fragile area. It was only Autumn last year when the survey showed the manufacturing sector reaching negative figures for the first time and there was a concern that this could be a long downward slide as a consequence of uncertainty and unpredictable events. This memory is still too recent for organisations to relax and breathe a sigh of relief that things are on the up.

Professor Tyson added: "It is important to remember that the figures slumped to a desperate low at the end of last year and are now making a slow recovery - we shouldn't get too excited that things are on the up as they have realistically just levelled out."

This is supported by the RCI reported business confidence levels which reached their lowest point since the start of the RCI in Autumn last year: the net percentage of respondents who were optimistic about business conditions stood at just +20%, on balance more than half (+58%) have now given confident predictions. A figure more similar to the views when the RCI started in Winter 1999 (+57%).

This may explain the differences between the CBI's optimistic forecast and the March 0.8% fall in the level of manufacturing output.

However, despite such caution about manufacturing there is an expected increase in recruitment with all sectors anticipating employing more people: a definite positive sign in the economy.

The Recruitment Confidence Index for manufacturing stands at 120 for all staff and 116 for managerial / professional staff - a higher rate of increase than in the previous quarter.

Recruitment Sales Manager at the Daily Telegraph, Nick Hill, said: "A particularly welcome sign in this Spring's report is that many companies, across all sectors, expect to expand their workforce over the next six months.

"In comparison, the last quarter's results were greeted somewhat curiously as it wasn't clear that those early signs of returning business confidence weren't just illustrations of the usual optimism associated with entering a new year. Happily, this survey's findings seem to be bearing out that recovery is firmly in sight."

The optimism and buoyancy in the manufacturing sector and the prediction of more jobs are borne out by the fact that there will be more unfilled vacancies within the sector between now and September, than during the last six months.

Net percentages are used to calculate predicted changes. The net percentage is calculated as the difference between the percentage of organisations reporting an increase, minus those reporting a decrease.

The indices are calculated that values larger than 100 imply an expected increase in recruitment activity. Values less than 100 imply that recruitment activity will fall. When the RCI indices obtain values close to 100, recruitment activity is expected to remain stable.

The current report is based on a representative sample of UK organisations with at least 25 employees. Respondents include HR directors and managers, finance directors, managing directors and recruitment specialists.

The full report is available to the public, price £50. To obtain a copy contact Caroline Mahoney, Cranfield School of Management, on 01234 754808 or email [email protected]

For further information contact Helen Fulcher, Press and PR Officer, Cranfield School of Management 01234 754348 or email [email protected] or Kate Enright, Press and PR Manager, 01234 754425 or [email protected]