UK firms' confidence plunges

Manufacturing is on the brink of a recession

Manufacturing in the UK is suffering its worst crisis of confidence in more than two years, according to a survey by the British Chambers of Commerce (BCC).

The survey also found that the UK service sector - traditionally seen as the stalwart of the British economy - is beginning to lose its grip on growth, just as a recession closes in on manufacturing.

The shock waves of the global slowdown are reaching further and deeper into the UK economy than previously expected

David Lennan
BCC

"The shock waves of the global slowdown are reaching further and deeper into the UK economy than previously expected," said David Lennan, Director General of the British Chambers of Commerce

The BCC reported that the balance of UK firms reporting shrinking domestic sales fell from +11 to -1 during the last three months.

Orders were also down with the balance of firms slipping from +8 to -5.

In addition, manufacturers have reported that their confidence in improving turnover and profitability has plummeted.

Service sector slips up

In the service sector the balance of companies reporting sales growth dropped from +31 to +26.

The deterioration in orders touched a two-year low, slipping from +26 to +19.

However, overall confidence relating to turnover and profitability in the service sector remained buoyant.

"With manufacturing confidence draining away, the wings of service sector growth clipped and price pressures on a downward trend, there exists both the scope and the need for a further cut in interest rates in August," argued Mr Lennan.

The survey, which covers 7,751 UK firms, also showed that investment in both sectors was at its lowest for two years.

Last month the Chartered Institute of Purchasing and Supply said that UK manufacturing had recorded its sharpest contraction since January 1999.

CIPS measures several economic factors including output and orders.