Confidence rising despite slowdown in manufacturing, says CBI

While manufacturing output growth slowed in the three months to July confidence is still on a rising trend, according to the Regional Trends survey published jointly today by the Confederation of British Industry and Experian, the credit rating agency.

The survey suggests that 14,000 jobs will be lost to manufacturing in the current quarter, but this is less than half the pace experienced last year. The West Midlands is set to bear the largest absolute fall, 5,000. This would be a 1.2 per cent reduction, the largest in percentage terms.

Not surprisingly, confidence among West Midlands' manufacturers remains depressed, in contrast to the improving picture in most regions. Trends in orders and output signal the recovery in this part of the country is lagging other regions. In addition, this region has been particularly hard hit by the steep rise in the cost of metals, because of the "metal-bashing" manufacture, a traditional West Midlands speciality.

But the broad trend is that key indicators such as overall business and export optimism, capacity utilisation, new order volumes and output are improving steadily, notably Yorkshire & the Humber, the North-west, Scotland, Wales, the East Midlands and the South-west, suggesting that the recovery in UK manufacturing is continuing.

In Wales, Yorkshire & the Humber and the South-west the balance of respondents to the survey reported an increase in employment, reversing three years of decline. In Scotland employment stabilized after almost four years of contraction. These are the regions that reported the most positive expectations about total orders.

Export optimism is buoyant in the North-west and Scotland, Yorkshire & the Humber, the South-west and the South-east and London.

Doug Godden, at the CBI, said: "Following a strong six months, the UK's manufacturing recovery has moderated. But the regional pattern supports the view that this is not the beginning of a reversal in the sector's fortunes.

"Nevertheless, challenges lie ahead, in particular the strength of sterling on the one hand and rising raw material and fuel costs on the other, impeding the much-needed recovery in profits. This explains why confidence in some regions, such as the West Midlands, remains depressed."