EEF says the government must step in to save UK manufacturing from the economic scrap heap

Posted on 1 Dec 2008 by The Manufacturer

EEF, the Manufacturers’ Organisation, is calling for the Bank of England to cut interest rates by a further full per cent to continue to ease economic pressures on UK manufacturers.

Its latest quarterly industry trends report with Grant Thornton manufacturing group highlights a serious threat of widespread redundancies next year. “We are looking at 90,000 job losses next year and I think there is very substantial risks to that forecast,” said chief economist at the organisation, Stephen Radley. “For many firms pay rises are off the agenda. Companies are talking about pay freezes or deferrals and, in the odd case, about pay cuts.”

EEF forecast a 1.3 per cent contraction for the manufacturing industry this year which will rise to five per cent in 2009. The engineering industry will be down 6.3 per cent in 2009 on its own.

While exports are still steady due to the weakened pound, domestic orders are at their lowest level since 2001.

Radley said that the significant drop in order books will begin to have repercussions over the next couple of months, with a fear that global manufacturers will relocate to follow their markets. The list of car manufacturers announcing postponements in production at UK plants is ever-increasing “smaller companies are very vulnerable,” said Radley. “If you look at an industry like motor vehicles – if we have a big change in the supply chain it raises a question mark about where the manufacturers decide to locate.”

Bob Hale of Grant Thornton’s said: “The sector needs immediate and positive help from the government and the Bank of England to ensure the release of funding for investment and development, and also further help in interest rate cuts and tax incentives.

Without this the sector faces a very bleak outlook for 2009.”