Manufacturing stifled by 'relentless' downturn

The "relentless" downturn in UK manufacturing and continuing falls in orders, output and employment is crippling the industry, according to the latest CBI Quarterly Industrial Trends survey, published today.

The first quarterly survey after the war in Iraq – involving almost 900 companies – offers "little sign of improvement" since the end of the conflict, the CBI claim. The data shows that domestic orders have now fallen for over three years, export orders have fallen for nearly seven years and confidence is continuing to decline.

Domestic orders fell faster than expected over the last three months with 38% of firms reporting a fall, while 14% saw a rise. The balance of minus 24% compares with minus 23% in the April survey and minus 13% in the January survey.

At the same time, export orders fell at their fastest rate for 18 months. Thirty-nine per cent of firms recorded a fall in export orders, while 16% saw a rise. The balance of minus 23% compares with minus 21% in 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 see 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, the study concluded.

Ian McCafferty, CBI Chief Economic Adviser, said: "Manufacturers have enjoyed little relief in the three months following the end of conflict in Iraq and the downturn in orders appears relentless despite the recent softening of the pound.

"Manufacturers' main hope is that a pick-up in the United States later this year helps trigger a gradual recovery in the UK. The recent Bank of England move was timely but we may need more cuts in interest rates to support the economy at this challenging time."

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

Only 16% of firms cite expansion of capacity as a reason to invest, the lowest figure since 1991. Uncertainty about demand remained the key investment constraint – cited by 62% of respondents. With the exception of the post-September 11th survey, this is the highest figure on record.

(GMcG)