The UK's engineering sector is expected to outpace the rest of manufacturing and the UK economy as a whole this year.

But a survey by the Engineering Employers' Federation shows the stronger growth masks significant regional and sector variations.

The federation's Engineering Outlook survey found engineering output and order balances had risen for the second consecutive quarter, with the strongest growth in the South.

Exports were continuing to grow with a seven per cent growth forecast for this year. But there was a more complex picture behind the statistics.

Only firms with more than 200 staff had been able to increase exports and smaller firms had suffered, said the EEF.

Margins and corporate profitability were at their lowest since the last recession and investment intentions continued to be cut back. Employment also continued to fall among engineering firms.

The South of England and Scotland were the strongest growing regions but the balance of orders among firms specialising in the motor sector became significantly worse in the past three months.

The electronics sector saw the best growth, followed by electrical equipment and aerospace. Overall, the engineering sector was set to grow by 3.5 per cent this year but the biggest risk to sustained growth remained the possibility of a hard landing by the US economy and any slowdown in Europe, it added.

EEF chief economist Stephen Radley said: "While the short-term outlook for engineering is increasing, on the back of productivity gains, a stronger euro and the growth in world trade, the upturn can only be sustained if levels of investment increase.

"The Government can encourage this through tax incentives and by avoiding over-generous tax cuts."

The EEF surveyed 1,441 companies between November 3 and December 1 last year.