Gloomy outlook on manufacturing

Some manufacturing areas are more confident than others

Recovery in the UK manufacturing sector has been hit by a prediction from the CBI that 36,000 industrial jobs will be lost over the next three months.

The CBI said optimism in manufacturing firms was still low, despite recent recovery, but had risen in almost half the UK's 11 regions in recent months.

The CBI warned "severe difficulties remain and there are some sharp contrasts in outlook".

But firms in most regions expect orders to rise in the next three months.

Companies mainly trading in the US are in a stronger position than those relying on continental markets Doug Godden, CBI economic analyst

Despite some signs of an improvement in the sector in parts of the country, there have been signs recently that a recovery in the sector might not be as strong as initially thought.

UK manufacturers saw the cost of raw materials rise in October at their sharpest pace for 10 months.

And according to the Office for National Statistics (ONS) manufacturing output fell 0.2% during September and was 0.5% lower than a year earlier.

The level of output was at its lowest rate since March this year.

Now the CBI's report says 31,000 manufacturing jobs were axed during the third quarter of the year, with more to come.

Regional differences

Despite this manufacturing wobble, the CBI says companies remain positive in Wales, Yorkshire, and the Humber, the South West and the North West.

But the West Midlands is "deeply pessimistic", with optimism among manufacturers falling at the fastest rate in almost two years.

Doug Godden, CBI head of economic analysis, said : "Three months ago manufacturers were gloomy in almost every region.

"There has been an encouraging turnaround in some of the regions though severe difficulties remain and there are some sharp contrasts in outlook.

"For example, in the South West orders are the least negative for almost two years, whereas in the West Midlands they fell at their fastest for almost five years.

Demand weak

Mr Godden said the difference in outlook may be explained by the differences in the make-up of manufacturing in each of the regions.

He said: "The US recovery is taking off. Companies mainly trading there are in a stronger position than those relying on continental markets."

Job cutting was fastest in the South East and London, and was expected to continue at a steady rate.

According to the CBI's survey of 830 firms, the only region where employment rose over the latest period was the South West, which is also expected to avoid the worst of the predicted jobs cuts.

Demand for goods in the UK remained weak, preventing firms raising prices.