Industry battles to stave off recession
RESEARCH shows UK manufacturing slipping into recession, but North East experts say it’s too early yet for that diagnosis.
The findings from the Chartered Institute of Purchasing and Supply’s (Cips) latest index of purchasing managers show a balance of -41 between positive and negative sentiment, with anything below 50 indicating a contraction in the marketplace.
However Alan Hall, region director of manufacturing body EEF Northern, said he did not believe the North East was yet in a recessionary position – but he did call for a half-point interest rate cut to help the hard-pushed sector.
The Cips said its findings were the worst in the 17-year history of its survey and all but confirmed a manufacturing recession after official data showed output falling for the fifth straight month last July.
The survey also showed output, new orders and jobs plunging at a record rate. The downturn was most severe in consumer goods, where output and orders both fell at record rates.
The stuttering global economy also meant there was no relief from exports, despite the recent weakness of the pound. New export business fell at the fastest rate for seven years.
In the North East, several firms have reported difficulties recently, with Watson Norie announcing 159 job losses this week, Miller UK in Cramlington currently consulting its workers on potential job losses and earlier in the summer, Jaycare in North Shields cutting 55 roles.
Mr Hall said: “The situation is not what it was until a couple of months ago. Some reports are putting manufacturing in a technical recession, but I’m not sure we are there yet. Very sadly, job losses are starting to emerge, though there are still some robust stories around. For all the slowing we see, I still think there are reasons to believe manufacturing is not in a recessionary position.
“People in oil, petrochemicals, defence and commercial construction look fairly recession-proof. One stimulus to the sector is the pound slipping in currency exchange markets.
“Those areas linked to automotive and retail are feeling the stresses and strains of the economic slowdown.”
Mr Hall said he would like to see an interest rate cut this month, but thought it more likely in November.
He said: “We won’t see them drop by 1.5% or anything like that, but such is the strain in the economy, there is a very strong case for easing rates.
“I would like to see a cut now, but there is a quarterly inflation report coming in November, so the MPC is more likely to move then – I would look for a half-point cut.”
CBI regional director Sarah Green said: “Manufacturers have been hit by the economic slowdown with demand falling and there are many surveys out at the moment that reflect this.
”However, we shouldn’t make things worse by talking ourselves into a state of despair. We owe it to these firms to keep a sense of perspective, as many manufacturing firms, such as offshore companies, are thriving and continue to grow.”
TUC general secretary Brendan Barber described the Cips figures as depressing. He said: “Just when manufacturing seemed to be enjoying some good news after years of contraction, we now find that output, orders and jobs are all falling.
“An interest rate cut next week would give a welcome boost to manufacturers. In the longer term, an intelligent industrial strategy, focusing on skills and innovation, but also targeted at sectors where the UK can enjoy competitive economic advantage, is needed.”
Barclays Capital economist Simon Hayes said the committee could act to ward against undershooting its 2% target in the months ahead as prices tumble in a recession.
I still think there are reasons to believe manufacturing is not in a recessionary position.
