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Last Updated: Tuesday, 26 October, 2004, 12:12 GMT 13:12 UK
Manufacturers facing cost squeeze
Male technicians working in microchip factory
Manufacturing is under pressure
Confidence among UK manufacturers has slipped in the face of slowing demand and higher costs, a survey has said.

The CBI said the sector was facing "clear threats", with profit margins under pressure from rising costs and "sluggish" orders and output growth.

On Friday, official data showed the UK economy growing at its slowest rate since the first few months of 2003.

However, a Bank of England official has said the economy's rate of growth could be faster than the figures indicated.

Data doubts

The latest official economic growth figures showed the UK economy grew by 0.4% in the three months to September, the weakest pace of growth since the first quarter of last year.

Oil and commodity prices are damaging profitability and we expect this pressure on margins to be maintained
Ian McCafferty, CBI chief economic adviser

But in an interview with BBC Radio Scotland on Tuesday, Richard Lambert, a member of the Bank of England's rate-setting Monetary Policy Committee, said he thought the figure might have underestimated the rate of growth.

"I'm not sure that the economy is quite as slow as the official data suggested at the end of last week," he said.

The slowdown in the GDP figure was mainly due to a 1.1% decline in industrial production.

Under pressure

The latest CBI quarterly industrial trends survey suggested that the manufacturing sector could be heading for tougher times.

After three successive quarters of increases, optimism among manufacturers fell in the last quarter, the CBI said.

While orders and output have continued to grow over the past three months, the rate of increase has been "sluggish".

And the CBI said firms were planning to cut back on investment and jobs.

"Although orders and output have risen, the rate of increase is slow," said Ian McCafferty, CBI chief economic adviser.

"Manufacturers are cutting back on investment and jobs as they become less confident in the pace of recovery.

"Oil and commodity prices are damaging profitability and we expect this pressure on margins to be maintained."

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