Engineering firms on the road to recovery

The last two years have been difficult for many companies in engineering, the prime example of manufacturing industry across the Yorkshire region.

Now - although it would be wrong to expect a sudden surge in business - a growing body of evidence suggests that we could be seeing the beginnings of what will hopefully be a sustained recovery.

Order books have begun to pick up, as major customers, both here and overseas, begin to recover from the effects of intermittent trade downturns and the confidence-sapping ripples that followed the Twin Towers terrorist attack on September 11 last year.

We should remember that engineering, as an industry, accounts for a hefty slice of Britain's overseas earnings - more than £40 of every £100 of export revenue comes from engineering products - and the industry is an important employer. So its economic health is important to all of us.

In areas like Yorkshire where there is a healthy mix of electronic, mechanical and chemical engineering, the industry provides work for many thousands of people both within its own plants and at the works and offices of service and materials providers of every kind.

Currently, local engineering companies report that orders are there to be had - but they are difficult to land and are tending to be of lower value than normal: more evidence of lingering caution among manufacturers.

Profit margins continue to be squeezed and, inevitably, firms are focusing heavily on cost reduction to try to soften this pressure. The industry is aware that although many of its customers would prefer to source their components locally, the lure of buying from low cost countries is a constant temptation.

There is some optimism, then, that the coming summer months will provide a sound platform for recovery, even for those parts of the local industry which have been operating at low levels since 1998/9.

Interest rates are stable and continuing evidence of renewed growth in the U.S. economy suggests an improving international trading climate. There is an overall optimism about the future that has been lacking for some time.

Of course, not everything in the garden is rosy. There is still an urgent need to ease the amount of official regulation that the Government continues to pile on to companies in such areas as employment law and health and safety. Each piece of legislation inevitably presents another bundle of bureaucracy in the form of record keeping and administration - and additional costs.

There is also a pressing need for improvements in the communications - both physical and electronic - infrastructure of Yorkshire. The benefits of broadband internet access, for instance, are still not available to many businesses in rural areas thanks to BT's reluctance to extend services where prompt returns cannot be assured.

Above all, the region's road and rail networks are in sore need of improvement. Too often we have seen where an accident on, for example, the A1 can bring parts of the region's roads to a crawl at a time when unreliable - and sometimes dirty - rail services have forced many to resort to road transport for commuting to work, thus worsening the congestion.

Additionally, many companies are facing big increases in insurance costs at this delicate time. As well as substantial increases in insurance premiums, a number of companies have reported problems obtaining cover for compulsory insurance such as employers' liability.

Facing such problems is not exclusive to engineering - they affect all of us. But they directly impact on companies, compelling many to accept increased costs at a time of squeezed margins.

Engineering is a resilient industry: it has to be, in view of the problems it faces and overcomes every working day. Given half a chance, and fair trades winds, it will always bounce back as one of our most dependable wealth creators.

Updated: 08:51 Tuesday, May 21, 2002