No escape from the manufacturing slow-down


The woe continues for the UK's beleaguered manufacturing sector with figures from the Confederation of British Industry (CBI) finding that orders have slumped this month.

Following an encouraging August in which total orders hit their best level for nine months, 45 per cent of UK manufacturing firms reported a that orders were below average, while 12 per cent of companies said they were above.

The balance of minus 33 per cent compares with August’s level of minus 24 per cent minus 37 per cent in July.

With mixed fortunes in the UK's major international markets, export orders show no sign of overall improvement. Forty four per cent of firms said export orders were below normal, ten per cent said they were above. The balance of minus thirty four per cent compares with minus thirty two per cent in August and July.

Output is expected to remain flat over the coming quarter. Motor vehicle firms and the aerospace sector expect a sharp fall in output, while the food, drink and tobacco sector predicts a significant rise.

Ian McCafferty, CBI Chief Economic Adviser, said: "Some firms had hoped the worst was behind them, but manufacturers are not out of the woods yet. Order books have weakened once again and output remains flat. With few sustained signs of recovery, the manufacturing industry remains under severe pressure."

The CBI has also question the UK's record on manufacturing as a new report shows the sector shrinking faster than other industrialised countries. The sector's contribution to UK GDP has falled from 21 per cent to 17 per cent since 1997, markedly faster than Germany, France and the US.

The report attributes most of the decline to the restructuring of global manufacturing, which has affected every industrial country over the past 25 years, a trend exacerbated in the UK by the strong pound.

But it makes clear that the government has made the situation worse because of the build up of regulation, increases in business taxation and failure to improve transport.

According to CBI director-general, Digby Jones, manufacturing "is not being helped by some government decisions which are adding to costs, increasing burdens and introducing more regulations when we in business are least able to absorb them. In fact, sometimes ministers are making a tough life tougher."

Burdening manufacturers with too much regulation, he said, forces them to compete with “one hand tied behind their back."

But he also warned that firms are increasingly turning to developing countries to outsource production of high-value goods and services.

"The UK is successful with high value-added goods but that could be undermined. China and India are not just low cost locations," Jones said.

"They have technology and skills to match those found anywhere in the world. They are raising the bar for the rest of us. This is equally real in the service sector - and I don't just mean call centres - where the trend of skilled back office, IT, design and engineering jobs migrating to places like India has only just started."