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Last Updated: Thursday, 16 October, 2003, 23:36 GMT 00:36 UK
UK industry faces slowdown
Factory workers
Manufacturing orders are weak

UK manufacturing is at its weakest level since late 2001, a survey by the British Chambers of Commerce (BCC) suggests.

Its survey of UK plc's performance during the third quarter of 2003, from July to September, has confirmed the UK is "a two speed economy, with the gap between manufacturing and services widening".

The survey suggests recent signs of a pick up in the UK economy during the second quarter of 2003 were a one-off.

The BCC found the manufacturing sectors' position worsened, with employment, domestic and export sales coming in weaker than at any point since the fourth quarter of 2001.

Interest rates

That was right after the attack on the World Trade Centre created major uncertainties in an already weak world economy.

Call centre worker
Service industries are picking up more orders

"The weakness in manufacturing is a case for serious concern," said BCC director general David Frost.

"The services sector gained ground and experienced a marginal recovery across the board but export indicators are still relatively weak," the survey found.

Mr Frost said the Bank of England's decision makers "must not raise interest rates prematurely".

Many economists believe the Bank of England's Monetary Policy Committee (MPC) is pondering lifting interest rates from their present 48-year low of 3.5% soon.

But experts think the Bank is probably waiting for more concrete evidence of a turnaround before stepping in.

Gains in services

The BCC questioned 7,439 firms employing nearly three quarters of million people.

Among manufacturing firms surveyed, its measurement for domestic sales and orders came in at 0% compared to +9% in the previous quarter. "Home sales balances were at their lowest level since Q4 2001," it said.

Manufacturing exports also weakened to -2%, though employment in the sector edged up slightly, from -6% to -5%.

Service sector firms reported both domestic sales and orders had strengthened.

Sales improved from +13% to +26%, and orders from +9% to +18%.

Service sector employment rose but while export indicators improved, they remained "relatively weak".

The BCC urged the UK Government to put strengthening industry's competitiveness at the forefront of its economic agenda, particularly in the pre-budget report which Chancellor Gordon Brown is due to present in November.

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