UK manufacturers fearing slowdown

Manufacturers are trying to pass price increases onto consumers

UK manufacturers are facing sharply rising cost pressures and are expecting output to fall in the coming months, research suggests.

According to a survey by the CBI and Experian, the bulk of manufacturers across the country expect production to fall in the next three months.

The West Midlands and Scotland are likely to be worst hit.

However, exporters continue to fare well with firms in Yorkshire, Wales and Northern Ireland thriving especially.

Exporters focusing on Europe have been boosted by the weakness of sterling against the euro in recent times.

Cost pressures

Overall, the latest CBI survey of manufacturers' fortunes paints a gloomy picture of trends in industry as the economy slows and inflationary pressures mount.

Although total orders remained unchanged nationally over the past three months, manufacturers in seven regions reported a drop in orders.

Average unit costs rose at their fastest rate since 1988, due largely to the surge in global oil prices, and manufacturers expect costs to rise further in the coming months.

Manufacturing confidence has tumbled over the past quarter Lai Wah Co, CBI

Total manufacturing output was unchanged, nationally, over the past quarter.

However, this masked widely varying performances in different regions.

Five regions, including the West Midlands and London, reported a drop in output over the period while four regions saw an increase.

The survey said that output is set to decline across the majority of regions over the three months to October.

In terms of employment, the majority of regions expect significant job losses in the next few months as demand slows, with the West Midlands, Yorkshire, Northern Ireland and south-east England likely to be among the worst affected.

"Manufacturing confidence has tumbled over the past quarter," said Lai Wah Co, the CBI's head of economic analysis.

"The climb in oil and other raw material prices over recent months has driven costs up significantly."

Job insecurity

Separate research published on Monday showed that fears about job security are rising in the workplace.

Two out of three people surveyed by Lloyds TSB said that general employment prospects were worse than a year ago while more than a third said their own job was less secure now than 12 months ago.

Lloyds TSB said job concerns would inevitably affect people's willingness to spend money, hitting the economy as a whole.

"If people don't feel safe in their job and high prices are putting incomes under pressure then demand for discretionary purchases will naturally slow," said the bank's chief economist, Trevor Williams.