NI holds nerve but UK business confidence slumps

Manufacturers' confidence has fallen in each of the UK's eleven regions for the first time in a year, according to the latest Regional Trends Survey, published by the CBI and Experian Business Strategies.

The smallest declines in confidence were reported in the North East and Northern Ireland, while the sharpest declines were recorded in the East of England, the Midlands, the North West and Scotland.

The survey also revealed a marked fall in export optimism for the next 12 months in most regions, with the East Midlands, the North West and Scotland the worst affected. But positive results were recorded in the North East and Yorkshire & the Humber.

The recent CBI Quarterly Industrial Trends survey showed the number of UK firms working below capacity had risen to 74%, representing a 20-year high, but the Regional Trends Survey revealed Northern Ireland had the lowest number of firms, 51%, operating below capacity.

However, despite the prevailing gloom, there are widespread expectations that output would pick up over the next four months, fuelled by improvements in total orders. While the North East was the most optimistic of seven regions, Scotland and Wales expected output to decline.

Peter Gutmann, Associate Director of Experian Business Strategies, said: "The gloomy tone in this survey is consistent with the tough time manufacturers are facing in export markets. Global demand is still weak and there are clear downside risks to the sluggish upturn expected this year.

"The positive responses from a few regions on some key forward looking indicators are therefore encouraging. Moreover, the pound's depreciation against the euro in recent weeks could provide a little relief for hard-pressed manufacturers in the months ahead."

With profit margins under pressure, no regions plan to increase investment in plant and machinery. The most negative investment intentions were recorded in the South East and London, Northern Ireland, Wales and the South West.

For the second consecutive survey, employment is expected to increase in Northern Ireland, though firms expect employment to contract in all other regions. The largest decline is expected in the West Midlands, followed closely by the South East and London, the North West and Wales. Overall, the CBI and Experian predict 42,000 UK job losses in the first quarter of 2003.

The CBI's head of economic analysis, Doug Godden, said that with further job losses on the horizon, manufacturing confidence had deteriorated and that faced with this difficult climate, firms had no intention of increasing investment.

Nonetheless, he said it was "encouraging that many regions expect output to pick up".

(SP)