Output fall prompts rate cut demands

Nov 6 2008 by Peter McCusker, The Journal

THE longest decline in manufacturing output for over 25 years has prompted calls for interest rates cuts and further Government support for the sector.

New figures show that output fell by 0.8% in September, the first time since December 1980 that output has fallen for seven months in a row.

North East manufacturers say this heightens the need for a 1% interest rate cut later today, but have also called for a package of further measures to support firms.

EEF regional manager Tony Sarginson said: “This shows the decline in manufacturing is accelerating and reinforces the need for bold and decisive action by both the Bank of England and government.

“A full point cut is the bare minimum required from the Bank while government must use the forthcoming pre-Budget statement to set out timely and targeted measures to help business.”

The EEF has listed areas it wants Government action including tax breaks, investment support and a reduction in the regulatory burden.

Twenty per cent of North East workers are employed in manufacturing and the sector has witnessed a boom in the last two years fuelled by the success of Nissan and the region’s oil and gas companies.

But this came to a halt in the third quarter of this year when the North East witnessed the biggest output fall of all UK regions. Falling production of transport equipment such as motor vehicles was a major drag on industry between August and September, the Office for National Statistics said.

This week The Journal has reported on fears of job cuts at Nissan in Sunderland and, 300 job losses at truck manufacturer Caterpillar in Peterlee.

Sue Hunter, managing director, Durham-based machine parts maker PSI Global – and a former winner of the Best Woman in International Trade category at the 2004 North East Women Entrepreneur Awards – backed the EEF.

She said: “Tax and regulation must be kept to a minimum, to allow businesses to concentrate their time and money on developing technical innovation and sales. The most effective way to improve manufacturer’s liquidity would be an immediate and universal reduction in the tax burden.”

One North East director of business and industry Ian Williams said: “Clearly this report is of concern to us as manufacturing is so important to the North East.”

EEF lobby

THE EEF are lobbying the Government for the following to help manufacturers;

:: To reverse last April’s rise in Corporation Tax from 20% to 22% and increase the Annual Investment Allowance from £50,000 to £250,000 for 18 months.

:: Reduce the regulatory burden and delay the introduction of new employment and environmental regulations currently in the pipeline. In particular, the implementation of the right to request flexible working.

:: Increases in the landfill tax, aggregates levy and climate change levy should be postponed and rates maintained at their current level.