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Wednesday, 24 January, 2001, 13:09 GMT
Business confidence falls
Graph of manufacturing output
Manufacturers expect output to rise in four months
Manufacturers remain concerned about the general state of the UK economy, although they are more upbeat about prospects for the export industry.

In the latest quarterly industrial trends survey by the Confederation of British Industry, business confidence fell, but more slowly than in October.

The CBI said that 24% of firms were less confident than four months ago, while 21% were more confident.

This is the fourth successive CBI survey in which business confidence has dropped.


Signs of a slowdown in the US could be contributing to the further fall in manufacturers' confidence

Nick Reilly
CBI

"The decline in business confidence reflects the general uncertainty about the economy," says Nigel Pain, a senior research fellow at the National Institute of Economic and Social Research.

He also points to worries about a slowdown in the US and unusual disruptions to the UK economy, such as the problems with the transport infrastructure and poor weather, as key factors.

The National Institute predicts that GDP growth for the fourth quarter of 2000 will be 0.4%, down from 0.7% for the third quarter.

The CBI survey is considered a key measure that can help predict the direction the economy may be moving in over the next few months, as businesses take decisions about investment and hiring.

And, as fears are growing that the UK economy may be affected by the situation in the US, it is being closely watched by economists and the Bank of England's Monetary Policy Committee, which considers UK interest rates.

Exports better

Manufacturers, however, felt more positive about the prospects of the export industry over the next 12 months.

Optimism has risen for the first time in a year, said the CBI. It has also increased at the fastast rate since October 1996.

In the survey, the CBI found that 27% of firms were more positive about export prospects than four months ago.

The survey also found that 20% were less optimistic. The balance of plus 7% compares to minus 6% when the CBI published its last survey in October.

Mr Pain believes the optimism derives from an easing in the value of sterling. "They survived when sterling was strong."

The strength of the European Union economies is also maintaining confidence in the export market, he says.

Manufacturing output

According to the survey, output increased slightly.

The CBI reported that 29% of firms said orders were up, while 25% said they were down.

Factory worker
Firms expect total orders to improve slightly over the next four months

The increase of 4% compares to minus 9% in October.

Firms expect total orders to improve slightly over the next four months.

"Today's survey contains mixed news for manufacturers," says Nick Reilly, chairman of the CBI's Economic Affairs Committee.

"Both domestic and export orders are expected to rise, but investment intentions and employment prospects all remain depressingly weak."

He adds, "Signs of a slowdown in the US could be contributing to the further fall in manufacturers' confidence."

Weak investment

The CBI also said that plans to invest in plant and machinery in the coming year remain weak. Inadequate net returns was cited as the most important investment constraint.

Employment fell more quickly than reported in October. The rate of job losses is expected to increase over the next four months.

The CBI conducted the survey between 14 December and 10 January.

A total of 984 manufacturers responded, and around 60% of replies were received before the surprise 0.5% cut in US interest rates on 3 January.

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See also:

14 Dec 00 | Business
UK manufacturers more optimistic
18 Jan 01 | Business
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06 Oct 00 | Business
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18 Dec 00 | Wales
Welsh manufacturing 'in crisis'
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