Growing economic uncertainty in across the euro zone has resulted in a decline in UK manufacturing activity in the last quarter according to EEF and business advisers BDO.
The Q4 Manufacturing Outlook survey showed that although growth remained positive, output and orders have dropped. Since Q2, output has decreased from a balance of change of +27% to +12% and orders have declined to 2008 Q4 levels.
EEF chief economist, Ms Lee Hopley said that she had thought a plan for the eurozone would have been established by now but that “a real risk of a sustained downturn” existed if no clear plan is developed to counter the sovereign debt problem.
Continuing Hopley said: “The signs of caution that had been emerging through the second half of this year have clearly become entrenched as global growth concerns have escalated. There are not only question marks over wider manufacturing prospects at the beginning of 2012, but also the exports and investment needed to underpin sustainable growth.”
By sector, the divergence in performance which had become apparent last quarter has increased in the last three months. Basic metals, rubber and plastics and electronics both reported negative output and order balances. In comparison, sectors like automotive and mechanical equipment have experienced a strong quarter.
Looking forward the survey shows clear concerns about future prospects with a further contraction in order books expected in home and overseas markets in the next three months. As a result, EEF has downgraded its forecasts for manufacturing to 0.9% growth in 2012.