Sunday 25 September 2016

Revenue and confidence on the rise in manufacturing sector

Paul O'Donoghue

Published 09/12/2015 | 02:30

Almost two-thirds of manufacturers have seen revenue increase during the year to date, according to a new study.

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The survey of 270 manufacturers, conducted by market research firm Ipsos MRBI on behalf of AIB and business group Ibec, also found just 12pc are expecting a fall in turnover while 27pc of those asked said they expected no change. A total of 60pc of the companies surveyed were Irish owned.

Almost half said they expected the situation for their business to improve in the next year, while 33pc said they forecast better conditions within the next three years. But 8pc said they thought it would take five years or more for trading to improve while 12pc said either that they did not expect business to improve or said they were unsure.

Despite the optimism, just a third of companies said they had taken on more employees compared to 2014, with 57pc saying that their staff levels had remained static.

And 10pc said that they cut some of their workforce during the year, with 46pc of the companies employing 50 or more.

Between 2008 and 2012 a lack of competitiveness meant domestic manufacturers struggled and the number of Irish companies fell by 20pc with employment dropping by 23,000 in the sector.

However, the sector has been in growth for almost two years. According to Investec's monthly Purchasing Managers' Index, during the month of November the sector expanded again while new orders rose for the 29th successive month and new export business also continued to grow. As a whole the industry employs almost 160,000 people.

Director of Ibec networks Aviné McNally said the survey shows the sector "is optimistic", however she admitted that it's facing critical challenges.

"Manufacturing is the heartbeat of the economy," she said. "Not only does the sector contribute in terms of direct employment and expenditures in the economy, but also by creating regional and secondary employment, stimulating innovation and research and is also a driver of technological advances and management capability." She added: "There are however, a number of challenges that the sector faces, particularly in relation to cost competitiveness, national infrastructure and access to skilled labour. We must focus on addressing these challenges, so we do not lose the opportunities and the gains."

The top three external challenges identified in the survey were reduced consumer demand, cited as a major obstacle by 52pc of respondents, the exchange rate (cited by 48pc) and compliance with government regulation (cited by 40pc).

The top three internal challenges identified were maintaining profitability and margins, increased overhead costs and the price of energy. They were identified as major issues by 68pc, 59pc and 56pc of respondents respectively.

AIB sector specialist Alan Makim said the manufacturing sector "has fuelled Ireland's strong export led recovery in recent years". He said it "remains a key sector for AIB. Demand for plant and equipment finance is strong as business activity levels increase and companies begin to replace older assets."

Meanwhile, the latest trade forecast from HSBC notes the long-term outlook is bright, as Ireland benefits from solid growth in the UK and US.

Buoyed by a high level of trade openness and a recovering global economy, the value of Irish merchandise exports is expected to perform solidly over the next five years, accelerating to around 7pc a year by 2019-20, HSBC said.

The chemicals sector will be the main driving force, with export growth averaging around 6pc a year over the next five years.

Irish Independent

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