UK's manufacturers remain gloomy

Factory output is still expected to fall rapidly, says the CBI

UK manufacturers' order books have continued to contract sharply, despite a fall in the value of the pound, a monthly survey by the CBI has said.

Companies say they expect worse to come, with expectations for production in the coming months remaining at their lowest since the recession of 1980.

CBI economist Ian McCafferty said the figures made "depressing reading".

A balance of 42% of firms say they expect output to fall over the next three months.

Meanwhile manufacturers have also reported the biggest fall in export orders since October 2003.

'Deepening recession'

The CBI's monthly industrial trends survey showed a balance of 33% of firms reporting export orders lower than normal, as the downturn deepened among the world's developed economies.

Manufacturers are only likely to see things get worse from here Paul Dales, Capital Economics

Mr McCafferty said: "It is worrying that, despite the 20% depreciation in sterling over the past year, export orders remain so weak."

"Our export competitiveness is increasing but many of our key export markets are contracting rapidly."

Overall orders are also well below par, with a 35% balance of firms reporting lower-than-expected order levels.

"Figures for manufacturing continue to make depressing reading, with output still expected to fall rapidly in the coming months," said Mr McCafferty.

The CBI said the rapid economic decline was affecting the prices firms were able to charge for their goods., with many larger firms expecting to lower their prices over the next three months.

Paul Dales, UK economist with Capital Economics, said the survey "remains consistent with the recession deepening in the fourth quarter".

"Accordingly, manufacturers are only likely to see things get worse from here," he said.

The CBI report came after official figures earlier this week showed an eighth successive monthly fall in manufacturing output.

The industrial trends survey is often seen as a forward-looking indicator that provides pointers to the future direction of the UK economy.