UK manufacturing continues its downward spiral

There
has been no relief from the ‘relentless’ downturn in UK manufacturing with
further falls in orders, output and employment, according to the latest CBI
figures.

The
CBI’s Quarterly Industrial Trends survey of almost 900 companies, which covers
the first quarter after the war in Iraq, offers little sign of improvement
since the end of the conflict.

The
data shows domestic orders have now been falling for more than three years,
export orders falling for nearly seven years and confidence continuing to decline.

Domestic
orders fell faster than expected in the last three months, with 38 per cent of
firms reporting a fall, while 14 per cent saw a rise.

The
balance of minus 24 per cent compares with minus 23 per cent in the April
survey and minus 13 per cent in January.

At
the same time, export orders fell at their fastest rate for 18 months, with 39
per cent of firms recording a fall, while 16 per cent saw a rise. The balance
of minus 23 per cent is down 2 per cent on the April survey and is the fastest
fall since January 2002.

As
a result, total orders continued to fall sharply, after declining at the
fastest rate for four years in the April survey. 

Firms
do not anticipate the decline in either domestic or export orders coming to an
end over the next quarter, but do expect the pace of deterioration to ease
slightly.

Output
declined broadly in line with expectations over the last quarter and firms
expect a further, but noticeably smaller, decline over the next three months.

Ian
McCafferty, CBI chief economic adviser, said: "Manufacturers’ main hope is
that a pick-up in the US later this year will help to trigger a gradual
recovery in the UK. The recent Bank of England [interest rate] move was timely,
but we may need more cuts in interest rates to support the economy at this
challenging time."

Other
findings:


Job shedding continued at a rapid pace in the past three months, but at a
slightly slower rate than expected.


Nearly 70 per cent of firms are working below capacity, slightly down on the
previous survey, but well above the survey’s historical average of 58 per cent.


Only 16 per cent of firms cite expansion of capacity as a reason to invest, the
lowest figure since 1991.


Uncertainty about demand remains the key investment constraint, cited by 62 per
cent of respondents. With the exception of the post-September 11 survey, this
is the highest figure on record.


Manufacturers plan to cut investment in building, plant and machinery at a
significant rate over the next 12 months. Projections for spending on
innovation and training remain flat.

By Ben Willmott

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