A fall in manufacturing output has caused clients to reduce hiring plans and make redundancies, hitting recruiters’ profits even as skill shortages remain.

The Office for National Statistics’ latest Index of Production, which measures manufacturing output, has recorded decreased output since May, with production in July to September 1.3% lower than the previous quarter. The transport equipment industries were the most affected, falling by 2.3% in output and facing a raft of headline-grabbing redundancies.

Simon Roberts, regional manager of technical recruiter Jonathan Lee Recruitment, told Recruiter it was impossible for the recruitment industry to buck such strong downward market trends in production. “Certainly on the permanent side you can’t be immune to the market. Land Rover has just announced 850 contractors are going to be cut; that’s going to have a huge impact,” he said, following the announcement that 850 agency workers at Jaguar Land Rover’s West Midlands operations were to lose their jobs on 27 November, taking its total number of job losses to 1,450 this year.

However, he added temporary contracts in both the aerospace and defence industries had buoyed business. “We have seen a reasonable increase in our contract numbers. That’s down to one or two specific projects, mainly related to the defence sector.

“The aerospace market is reasonably buoyant, but we do think around the half-year stage next year it is going to go the same way [as the rest of the manufacturing sector] — we’ve already seen Rolls-Royce make cutbacks.” The aerospace manufacturing firm announced plans to cut 2,000 jobs next year in response to a slump in demand.

However, while recruiters reel from a fall in demand, the sector is still suffering from skill shortages.

Dave Philpott, managing consultant at executive, manufacturing and technical staffing agency Redline, told Recruiter the company had identified areas of demand from existing clients within the electronics industry.

“We have seen strong demand for service mount technology roles and a lot of positions at middle management level, such as production managers, supply chain managers and purchasing managers. A lot of people are trying to drive the costs down within the parts they buy in electronics.”

Louise Hoffman, acting editor of trade publication The Manufacturer, told Recruiter that skill shortages are one of the biggest problems facing the industry.

“There’s a problem with perception of the industry in schools. A lot of companies are taking action, taking on more apprentices and setting up skills academies,” she explained.

According to Philpott, the perception of undergraduates and increased candidate caution were making the situation worse.

“There are very few people doing electronics degrees. When we looked for graduates this year it was quite hard to find them. Electronics is a tough degree to do. It’s very maths orientated. It’s not an easy choice and it’s not seen as being that sexy. There is not enough push on the sort of product you could be working on. These guys are inventing the latest mobile phone and the BlackBerry, but I don’t think that bit is being pushed very hard.”

There is also hope that environmental targets and a weak pound will help bolster the sector.

Roberts told Recruiter: “The green agenda is going to hit. I think the automotive industry will be at the forefront of that. There is going to be a huge demand for technology that makes cars more efficient and people who understand the new emissions legislation.”

Hugo Sellert, head of economic research at Monster Worldwide, told Recruiter: “Hiring for production workers has slowed, but not as much as for the economy as a whole. Although softer global demand is impacting orders, UK manufacturers are starting to feel the benefits from easing inflationary pressure and a weakened Sterling supporting exports.”

The monthly Monster Employment Index, which tracks online advertising, recorded a fifth consecutive decline of one index point in the manufacturing industry.