Fears of a recession in the manufacturing industry have eased slightly, but significant growth remains elusive, according to a new report.

Companies are seeing a rebound in activity in the first quarter of the year as domestic and global markets improved, said a report by Make UK and business advisory firm BDO.

Their research suggested the improvement was being largely driven by strong demand in the electronics and mechanical equipment sectors.

This could be due to companies investing in digitalisation and extra capacity to counter labour shortages, while demand for electronics goods was said to be especially strong from overseas, especially the EU.

Make UK and BDO cautioned against the worst of the conditions being over and are forecasting a contraction for manufacturing in 2023 as the substantial challenges the sector is facing show few signs of abating.

Fhaheen Khan, senior economist at Make UK, said: “Manufacturers have seen a rebound at the start of the year as conditions have improved in their major markets, and business confidence has improved.

“However, one swallow doesn’t make a summer, and it is far too early to say the worst has passed given the significant challenges the economy faces.”