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An economy in need of 'more technocratic horsepower'

01 August 2011

It is perhaps fitting that within days of taking up his role as president of the Royal Academy of Engineering, Sir John Parker was able to announce the start of a construction project at the Academy's Carlton House Terrace headquarters that has been the subject of his campaigning and fund raising for the past fifteen months or more. Making his inaugural speech as president to senior figures from the engineering profession - the final event to be held at the Academy before it undergoes an eight-month, £6.5m makeover to transform it into a national Forum for Engineering - Sir John restated his intention to bring engineering into the heartland of society.

In May, the Academy announced that it had secured donations of £10m to its 'Making Things Better' Campaign, which was launched in March 2010 under Sir John's chairmanship. Back then, the immediate past president of the Academy, Lord Browne of Madingley said that Britain must rebalance its economy by nurturing some sectors and investing in new ones. His vision was one of nascent industries in low-carbon energy, robotics, nanotechnology and creative design soon providing thousands of new jobs in the UK. "We plan to put engineering where it belongs, at the heart of Britain's future," he said at the Making Things Better launch.

By investing in additional education and engagement activities and by working with strategic partners, the Academy hopes to attract many more young people from a diverse range of backgrounds into the profession. Vital to this collective ambition of re-positioning engineering is the creation of the Forum for Engineering at the Carlton House Terrace site, also home to other national academies, including the Royal Society and British Academy.

The re-development project is expected to transform the building from a fusty club style environment into a world class venue for engineers and all those interested in engineering, enabling them to meet, collaborate and share their knowledge. New features will include a 170-seat lecture theatre as well as exhibition and meeting spaces, to inspire and engage people about engineering. In setting out the agenda for his three-year term as president, sir John pulled no punches:

"We must, with the institutions and other partners, promote engineering and the role of the professional engineer vigorously in public life," he says. "We must also foster better education and skills such that the needs of the country are met and the aspirations of our young people are satisfied. If we are to have an economy with more technocratic horsepower, then we need more young people to set their sights on becoming engineers. The Forum will allow the Academy to do more for, and with, our partners. We see it as a national asset for engineering."

Business optimism falls for first time in two years
Last week, the CBI reported that for the first time in two years, business optimism fell among UK manufacturers, and expectations of slower activity are driving a reappraisal of business plans. Growth in total orders and production eased slightly in the three months to July and manufacturers expect a further deceleration over the next quarter. As a result, following a fourth successive increase in employment in the CBI's Quarterly Industrial Trends Survey (QITS) series, manufacturers plan to cut headcount over the next three months and have revised down their investment plans for the year ahead.

Responding to the July QITS, manufacturers reported that they were less optimistic than three months ago (-16%), the first fall in sentiment since July 2009. Over the past three months, manufacturers recorded a slight easing in activity relative to the strong growth of recent surveys. Of the 445 respondents, 32% said they saw an increase in the total volume of new orders, and 24% said they had fallen. The resulting balance of +8% represents a slight easing in the pace of growth relative to the previous five quarters.

Nevertheless, factory output continued to grow at a pace above the long-run average in the three months to July, with a balance of +11% of manufacturers reporting an increase. However, this was again slower than the strong expansion over the past year. Over the next three months, a more marked easing in activity is anticipated, with orders expected to be unchanged (balance of 0%), and production expected to rise more modestly (+6%).

As a result, manufacturers are reappraising their business plans. After a fourth successive quarter of growth in employment, they plan to reduce headcount over the next three months (-10%). Investment intentions for the year ahead have also weakened. In particular, manufacturers are planning to spend less on plant and machinery (-17%) relative to the past twelve months, with plans for capital spending now below their long-run average for the first time since July 2009.

Fewer firms plan to invest in the year ahead to expand capacity, with more firms instead planning to replace existing capital and increase efficiency. In a further sign of easing capacity pressures, this has also fallen back as a constraint to output over the next three months (now cited by 20% of firms).

The CBI’s chief economic adviser, Ian McCafferty said that the slight slowing in orders and output growth over the past quarter is in line with a broader slowing in production globally, with supply chains around the world impacted by the Japanese tsunami earlier this year. Sentiment has also been affected by concerns over the euro crisis, and the squabbling over the US debt ceiling. This slowdown is expected to persist into the third quarter.

“How far the slowdown will be borne out is yet unclear,” says Mr McCafferty, “but the combination of political and economic uncertainty is sapping confidence.”

Les Hunt

[PS National instruments releases LabVIEW 2011 today. Click here for more information.]

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