Outlook not all doom despite industry slump

Posted on 26 Oct 2011 by The Manufacturer

UK manufacturers face an unwelcome outlook according to the CBI which has announced predictions of significant falls in activity over the next few months.

For the second consecutive quarter, sentiment about the general business situation and export prospects has fallen.

Ian McCafferty, chief economic adviser at the CBI, said in a statement: “This fall in sentiment is the sharpest we have seen since the height of the recession in the middle of 2009. This lack of confidence among manufacturers can be attributed to uncertainty over developments in the Eurozone.”

The survey adds to the concerns of many that the economy is slowly coming to a halt and deals a further blow to Chancellor George Osborne’s campaign to rebalance the economy towards more exports.

Regardless of the decline, the report also revealed modest rises in domestic demand and production over the past three months. In another show of strength, employer numbers are at their highest in over a year, a rise of over 20% since January.

McCafferty added: “Although manufacturers saw modest growth in orders and production over the past year, we eagerly wait to hear the decisions concerning Eurozone this evening, as it is difficult to predict growth until we know a little more.”

Speaking about the survey leading economist, Howard Archer, of IHS Global Insight, said: “The CBI survey fuels concern that the UK economy is in serious danger of contracting in the fourth quarter. It is blatantly evident that manufacturers are being hit hard by domestic and international headwinds.

He added: “Hopes had been high during 2010 and earlier this year that the manufacturing sector could make a sustained decent contribution to UK growth and help the economy become more balanced. The October CBI survey provides a reality check on this front.”

Of the 446 manufacturing firms that took part in the Quarterly Industrial Trends Survey 30 per cent said that domestic orders rose in the three months to October and 25 per cent said that they fell. This is marginally better than expectations of no growth and signifies a very modest growth in the last quarter.

Shelley DeBere