Monday, March 02, 2009

Factory downturn 'accelerating

The downturn in UK manufacturing has accelerated and could lead to 140,000 job cuts in the sector this year, according to a survey.

Engineering and manufacturing body the EEF, which surveyed 782 firms, said production and orders had hit record lows in the first two months of 2009.

The group forecast that manufacturing output would fall by 8.6% in 2009, with a growth of just 0.2% in 2010.

It said there was "simply no hiding the fact these figures make grim reading".

However, a separate survey of 11,000 firms by BDO Stoy Hayward reports a slight rise in short- and mid-term confidence as many accept the realities of the recession.

BDO Stoy Hayward said the growth in optimism suggested action was being taken to adapt to the economic climate, although it predicted that 320,000 more jobs would go across the UK in the next three months alone as firms cut back.

Peter Hemington, a partner at the firm, said: "Companies are now adapting their business models for an uncertain future."

The EEF's chief economist, Steve Radley, said demand from both domestic and international markets had shown steep declines, making the past three months "extremely difficult for manufacturers".

"Few firms expect things to get better in the near future but they are also focusing on making sure they are ready to take advantage of the eventual recovery," he said.

As well as a decline in manufacturing output, engineering output is set to shrink by 10.9% this year and rise by 0.9% next year, the EEF added.

Cars parked

Of the firms surveyed, 39% more said output had fallen than those who said it had risen or remained unchanged (a balance of -39%), and 54% more said that orders had dropped.

The picture was bleaker in some regions, with firms in the West Midlands posting the weakest balance of output, at -63%, from -31% in the final three months of 2009.

The continuing decline was linked heavily to the weakening auto industry, the EEF said.

The East Midlands and eastern England also reported sharp falls in production levels.

The EEF said that firms in the motor vehicle sector had seen their output and orders balances fall to -91% and -81% respectively.

The recession has slowed demand for new vehicles as consumers look to rein in larger purchases - prompting some factories to shorten their working week or to enforce a temporary shutdown.

BBC NEWS | Business | Factory downturn 'accelerating

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