Manufacturing companies across the world are expecting their profit margins to narrow, even as demand for their goods increases.

Manufacturing companies across the world are expecting their profit margins to narrow, even as demand for their goods increases.

A majority (82 per cent) of 6,200 manufacturing executives surveyed by professional services firm KPMG expect their input costs to rise or stay the same, while less than a third (32 per cent) believe they will be able to raise their prices by this time next year. This global pattern is echoed among UK respondents.

Martin Scott, a partner at KPMG, comments: ‘Without the ability to pass escalating costs on to customers, firms will struggle to grow profits over the coming year, raising serious doubts over sustained economic recovery.’

However, despite these subdued profit expectations, producers in the UK appear to be growing sales and orders, according to data from manufacturers’ support organisation EEF.

The balance of companies seeing increased output in the second quarter of this year was +33 per cent, while for new orders the figure was +35 per cent, both record highs since EEF’s survey began in 1995. The organisation credited healthy export sales for the figures, but pointed out that the increases are coming from a low base.