North optimism despite slowdown
Aug 4 2008 by Karen Dent, The Journal
THE economic slowdown is biting deep into business confidence across the North East but the regional picture is not as bleak as many other parts of the UK, according to the CBI.
Its latest quarterly regional trends survey, carried out in conjunction with Experian, showed a decline in optimism across the UK and a widespread expectation of further slowdown in the manufacturing sector. However, the outlook for exports was less pessimistic at both regional and national levels.
“We are beginning to see the pressures of the economic slowdown feed into the region’s manufacturing base,” said Liz Smith, CBI assistant regional director.
“However the outlook for the North East is somewhat less downbeat than other regions with similarly high levels of manufacturing. In particular plant and machinery investment is expected to change little and North East manufacturers have been able to pass on cost increases through price rises, therefore mitigating any impact on profit margins.
“There are certainly indications that the North East, while not unaffected, is not feeling the effects of the economic situation to the same extent as the rest of the country.”
The high price of oil and other raw materials has driven up manufacturing costs and although some companies have been able to pass these on to customers, profit margins have come under pressure.
The region’s manufacturers have increased prices for exports and goods for the domestic market and these rises are expected to continue strongly into the next quarter.
“Exports are helping to limit the slowdown in the manufacturing sector, particularly boosted by sterling’s weakness against the euro,” said Peter Gutman of Experian.
“However, the near-term outlook for manufacturing still looks tough as the economy enters a precarious phase.”
Despite this outlook, the North East’s manufacturers said they expected little change in plant and machinery investment over the next year, in comparison to many regions which expected investment to fall.
The survey also pointed to a slower fall in building investment regionally than at a national level. Orders also remained unchanged from the previous quarter.
Alan Hall, Northern director of the EEF, said the overall picture from the CBI was downbeat, but North East firms were managing to hold their own.
“Manufacturing is still having a relatively good time compared to other parts of the region’s economy,” he said.
“Business activity wise, the confidence levels are still here for manufacturing. It may alter this year, or manufacturing could be accused of defying gravity, but so far, all our survey data shows that manufacturing is holding up much better than other parts of the economy.”
