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Deloitte, which has 23 offices across the UK including Newcastle, is among the country's leading professional services firms » 
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The Office for National Statistics (ONS) released figures this week showing the UK manufacturing sector shrank by 0.7pc in October. Manufacturing output was also revised down for September to just 0.1pc growth from a previous estimate of 0.2pc.
The North East's manufacturing sector will have a key role to play if the government is to achieve its aim of rebalancing the economy.
Despite welcome efforts to boost the manufacturing sector in the UK, it is still proving to be extremely difficult for many manufacturers to grow.
In addition to the current uncertainty in the Eurozone which is clearly affecting the ability of our region's exporters to plan for the future and spending reductions in areas such as Defence and Transport, North East firms face an additional set of obstacles that are holding back jobs and growth in the sector.
Local manufacturers are dealing with a combination of challenging factors from rising costs, to skills shortages and difficulties associated with accessing capital markets that need to be resolved to boost growth and job creation in the manufacturing sector.
Rising energy and raw materials costs mean factories across the North East are feeling the effects of sustained upwards pressure on the price of raw materials. Natural disasters and political unrest in 2011 have led to shortages and supply challenges of raw materials and energy. According to EEF, the manufacturers association, energy prices for manufacturers were 10% higher than in Germany in 2010, rising to 15% in 2013.
Despite rising unemployment and particularly high youth unemployment, manufacturers are still reporting difficulties in locating the necessary skilled labour to fill apprentice and graduate vacancies. This is backed up by research from the UK Employer Perspectives Survey which shows that the UK working age population has lower skills than the workforces in France, Germany and the USA.
The third major concern for manufacturers, Access to Funding is shared by many businesses as traditional bank lending is still proving difficult to achieve for manufacturers, despite the second round of the Regional Growth Fund allocating £93m to companies in the North East including many manufacturers.
Less than 9 percent of the population is now employed in manufacturing in Britain, compared to Germany which has 18.5 per cent and China which has almost 28 per cent. Furthermore, while there has been a sustained period of growth in the service sector, manufacturing now accounts for 11 per cent of gross domestic product compared to 20 per cent in 1997.
There is no quick fix to the skills shortage being felt by manufacturers. There have been positive moves to generate apprenticeships and career opportunities in engineering and manufacturing. However, more must be done to update the image of the industry to make sure the next generation of school leavers grasp the opportunities manufacturing can offer.
Simon Manning, Head of Manufacturing at Deloitte in the North East. 0191 261 4111
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