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UK manufacturers upbeat for 2014

British manufacturers expect the outlook to improve significantly in 2014, according to a new survey, as firms prepare to cash in on increased demand from emerging markets and boost exports.

The U.K. manufacturers' organization EEF and Aldermore Bank interviewed 200 senior executives in the sector and found that growth was expected in all markets and at manufacturing firms of all sizes in Britain.

Manufacturing output in the country is expected to expand by 2.7 percent in 2014, according to EEF, putting it top of the EU growth league. That figure compares to a contraction in U.K. manufacturing output of around 0.1 percent in 2013, based on official figures for the first three quarters and the EEF's forecast for the last quarter of 2013.

A worker welds a gas and oil rig connector pipe at the General Electric maintenance plant in Montrose, U.K.Simon Dawson | Bloomberg | Getty Images

Commenting on the findings, Terry Sculoer, CEO of EEF, wrote: "Manufacturers are telling us they expect to make a greater contribution to growth, investment and jobs this year. Innovation, energy and diversifying into new supply chain remain key opportunities but the U.K. and the euro zone are also looking better."

Sculoer did, however, argue that risks remained for the industry in 2014 — notably global economic uncertainty and rising energy costs.

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Indeed, last Thursday, a survey indicated that British manufacturing grew less quickly than expected in December, although the sector still looks on track to notch up growth of more than 1 percent in the fourth quarter of last year.

The Markit/CIPS Manufacturing Purchasing Managers' Index (PMI) fell back to 57.3 in December from November's three-year high of 58.1. This was below the 58.0 expected by analysts, but still well above the 50 mark that signals expansion.

In an effort to thrive in 2014, the survey found that firms were looking to improve productivity, have greater supply chain collaboration and increase overseas marketing efforts.

(Read more: UK growth to beat pre-recession peak in 2014: BCC)

Emerging opportunities

Indeed, looking abroad could prove key to a successful 2014 for manufacturers, with over half of the companies surveyed saying they expected their exports to increase – and some 10 percent expecting this pickup to be significant.

The research found that the importance of emerging markets was growing amid increased demand, and two fifths of companies viewed these markets as the best source of growth.

The Middle East was the region which had seen the largest increase in prospects with over half of the companies surveyed now involved in the area. There has also been an increase in companies expecting growth rather than contraction from the embattled euro zone.

(Read more: One in 10 young Brits 'have nothing to live for')

This broadly optimistic outlook from manufacturers comes amid hopes of a sustained economic recovery in Britain, which saw its unemployment rate fall faster than expected in the three months to October. The headline rate fell to 7.4 percent – its lowest level in four and a half years – and employment rose by 250,000 to a new record high of 30.086 million.

Meanwhile, economic growth in the U.K. is expected to beat its pre-recession peak in the second half of next year, according to the British Chambers of Commerce (BCC). The business lobby group upgraded its short-term gross domestic product (GDP) growth forecasts for the country, from 1.3 to 1.4 percent for 2013 and from 2.2 to 2.7 percent for 2014.

Some 70 percent of the companies surveyed believed the U.K. economy would improve in 2014, along with 57 percent thinking the global economy itself would have a good new year.


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