TWO new business surveys paint an uncertain picture prospects for 2016.

Faltering manufacturing confidence and a slowdown at the end of 2015 are the main findings in reports by manufacturers' body EEF and Lloyds Bank.

This year's annual EEF/Aldermore Executive Survey shows that manufacturers expect 2016 to be a year of tough decisions and opportunities outweighed by risks.

The main reason is global economic volatility, with manufacturers citing significant movements in exchange rates, economic volatility in a major market and uncertainty around the UK’s place in the EU as their top risks this year.

More than a third of manufacturers see upward pressure on business costs as a possible risk to growth in 2016.

Four in ten manufacturers expect global economic conditions to deteriorate further, with only 23 per cent expecting conditions to improve, although third see UK trading conditions improving.

Even so, expectations are substantially lower than the start of 2014 and the proportion of companies seeing Britain as a competitive location for manufacturing falling from 70 per cent last year to 56 per cent .

Positive signs include 55 per cent of manufacturers expecting to increase productivity and 43 per cent expecting higher UK sales, with 39 per cent opening up new export markets.

Andy Tuscher, EEF Yorkshire regional director, said: “The gloom that took the shine off UK manufacturing’s performance in 2015 is set to continue into 2016. But, while expecting similar challenges as those seen last year, manufacturers are still planning for growth.

“There is particularly good news about the number looking to prioritise investment in technology and innovation and those looking to explore new export markets. These are positive and proactive steps. At the same time, however, tough conditions call for tough decisions – and restructuring and cost-cutting efforts are clearly high on the agenda for some."

Yorkshire's private sector economy weakened at the end of 2015 as growth in output and new business slowed to three year lows.

The seasonally adjusted Lloyds Bank regional business activity index showed the slowest rate of expansion in output since February 2013 and new orders rising at the slowest rate since November 2012 .

Leigh Taylor, Lloyds area director for SME banking, said: “The upturn in the Yorkshire economy weakened in the final month of 2015, with the region ranking among the country’s lowest in terms of business activity growth.

"As a result, the rate of employment slowed, and was below the average seen over 2015. On a positive note, reduced raw material costs helped to alleviate pressures on company margins and encouraged employers to cut their prices to customers.”