The slowdown in UK manufacturing during Q1 and Q2 2011 seems to have set in as accountancy firm BDO reports a two year low in business confidence
BDO’s assertions as to manufacturing confidence are based on the latest figures from its optimism index and are backed up by a similar survey from Deloitte which tracks optimism among UK finance directors.
In the last four months BDO’s optimism index for manufacturing has plummeted from 16.4 in February, when strong 2010 performance still buoyed the sector, to 90.1 this month.
Commentators on the figures claim that weak domestic orders, the eurozome crisis and pessimism emanating from new stories like the Bombardier fiasco are to blame for the slump.
Bringing further insight however, as separate report from BDO titled, Manufacturing 2020 revealed that dissatisfaction and caution among manufacturers largely relates to government support in the form of more sympathetic tax regimes.
According to Manufacturing 2020, 86% of manufacturers feel it is important that the government issues a sector specific framework defining long term industrial policy. They are not satisfied with the Plan for Growth as a substitute for the shelved Manufacturing Framework which was due to be released last year.
Ninety-eight per cent of manufacturers feel the tax regime in the UK could be more supportive according to Manufacturing 2020. Recent complaints over tax constraints on business have been focused around carbon taxing.
The reported decline in confidence announced by BDO today represents a two year low for manufacturing and the accountancy firm has called for a third round of quantitative easing to facilitate growth over the rest of the year.
Chief economist at British Chambers of Commerce, David Kern, agrees and says: “To minimise dangers of a setback, the government must implement more growth-enhancing policies that will enable private sector firms to increase productivity and drive the recovery forward. On its part, the Bank of England’s monetary policy committee must postpone premature interest rate increases while fiscal policy is still being tightened and wage pressures remain weak.”
The downbeat confidence figures fall in line with a general revision of originally optimistic predictions for economic recovery. The National Institute of Economic & Social Research has said the current, sluggish conditions could well last into 2013.
BDOs report findings were compiled by the Centre for Economics and Business Research. The research covers 11,000 companies from a range of industries.