Manufacturing job losses

Manufacturers in the UK see no let up to job losses as optimism about export prospects fell at the quickest rate for almost three years, according to the Confederation of British Industry’s latest regional trends survey.

Estimates based on the survey suggest 29,000 manufacturing jobs will be lost between July and September this year. Only the South West and Northern Ireland are likely to avoid job losses.

Over the past four or five months manufacturers have reported significant job cuts in the North East, the East Midlands, the North West and Yorkshire and Humber.

But in this survey other regions – including the South East, East of England and the West Midlands – also recorded sizeable declines in employment, while Scotland registered its worst outcome since early 1999.

Some 36% of those surveyed said they were negative about employment prospects; just 9% were positive. This is the weakest expectation since January 1999.

Export prospects across the UK took another turn for the worse, with optimism falling at the fastest rate since October 1998. The sharpest declines were in Wales, the West Midlands, the South West and the North West. Only the East Midlands avoided a fall in export optimism.

Overall UK business confidence fell further, with a balance of 22% of firms being less optimistic about the general business situation. This compares with 29% in April when feelings was also affected by the foot-and-mouth crisis.

International developments are making life very tough for manufacturers.

The pound’s persistent strength and weak global demand account for widespread further falls in confidence in the current survey.

Previously resilient regions are experiencing the pain as much as traditional areas, as the downturn has affected new technology sectors. With traditional sectors still struggling, and hi-tech output falling, employment is bound to fall in virtually all regions.

This survey suggests that the recent rate cut was clearly justified.

The global slowdown is now hitting UK manufacturing hard, with firms in virtually all UK regions experiencing falling orders, output and employment together with severe pressure on profit margins. With underlying inflation set to remain within the government’s 2.5% target, further interest rate reductions may be necessary if consumer demand comes off the boil and service sector growth eases further.

Sudhir Junankar is the CBI’s associate director of economic analysis

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