Next year worst for decades, says EEF
Dec 1 2008 by Karen Dent, The Journal
MANUFACTURERS say they are facing their toughest conditions for 20 years as a result of the economy’s significant and sustained downturn.
The grim analysis comes from the manufacturing organisation EEF, which is calling for a full point cut in interest rates when the Bank of England meets this week.
The demand is in response to its gloomy 2009 forecast and fourth- quarter business trends survey. Carried out with accountants Grant Thornton, the report showed that output and order balances moved from positive to negative territory in the last quarter.
Output dropped to -11% from +15% in the previous quarter while the balance of export orders plunged to -10% from the previous three months’ +18%.
Domestic orders plummeted to -26%, their lowest level for almost eight years.
The pace of job losses accelerated and were widespread across the UK, the report said, and investment intentions fell to their lowest level for seven years because of weaker order books, pressure on margins and cashflow problems.
The EEF’s regional manager Tony Sarginson said: “Manufacturers in the North East have made substantial progress in recent years in improving their performance but the next 12 months are set to be some of the most difficult in two decades.
“What marks this downturn out from others is the alarming rate at which conditions have deteriorated through the autumn due to the problems in the financial markets.
“It is now imperative that Government and the Bank of England continue to pull on every lever at their disposal.”
Motor manufacturers were the hardest-hit sector, although weaker activity was prevalent among all types of businesses apart from electronics.
In the last quarterly survey, the North East reported the biggest regional dip in output, but this time, the West Midlands was worst hit. Apart from the South West, all areas were affected by a downturn in orders and the sharpness of the slowdown has led to a pessimistic outlook going forward into 2008.
Bob Hale, head of Grant Thornton’s manufacturing group, said: “The positive progress made by the sector over the last few years has been destroyed almost overnight by the catastrophic effect of the recent turmoil in the financial markets.
“The sector needs immediate and positive help from the Government and the Bank of England to ensure the release of funding for investment and development, and also for further help in interest rate cuts and tax incentives. Without this help the sector faces a very bleak outlook for 2009.”
But Liz Mayes, assistant regional director of the CBI, said that despite very real challenges, the North East’s manufacturing industry has solid foundations.
She added: “This survey echoes recent CBI evidence on the state of manufacturing and there is little doubt as to the challenges that companies will face into 2009.
“However, the North East manufacturing base has some key strengths which will help us see out the recession and we must look at what can be done to support companies to make sure the region is well positioned to make the most of the recovery when it comes.”
Andrew Sugden of the North East Chamber of Commerce echoed that view: “North East manufacturers have been investing heavily in skills to be world-class manufacturers.
“I think that’s reflected in the fact the worst results are coming from other parts of the country.”
What marks this downturn out is the alarming rate at which conditions have deteriorated
