Factory job losses forecast to reach 188,000

Some 188,000 factory workers will lose their jobs this year – more than 40,000 above what was forecast just two months ago. Alongside its latest grim prediction on jobs, the manufacturers' organisation EEF is forecasting an 11 per cent contraction in output over 2009, an estimate revised downwards by two percentage points after worse-than-expected falls in activity in the first quarter of the year.

Today's bleak forecast comes despite the 11th-hour, weekend rescue deal for General Motors Europe by the Canadian motor parts group Magna International. The deal for GM Europe, which includes Vauxhall in Britain and Opel in Germany, came ahead of its parent GM filing for bankruptcy protection in the US today.

As Britain's gross domestic product (GDP) dropped by 1.9 per cent in Q1, manufacturing plummeted by 5.5 per cent, the worst falls in any sector of the economy. Within the sector, engineering businesses will be the worst hit, with an expected decline in output of 17.5 per cent, five percentage points lower than previous estimates.

The EEF quarterly survey shows that output remained depressed and few signs of improvement in either domestic or export markets. The number of manufacturers reporting falling production and orders remains in double-digit negative territory. The pace of job cuts is already rising as the sharp falls filter through, and investment plans remain at their lowest level since the survey began.

But despite the gloom, the indicators are not falling as fast as they were and the results were broadly in line with expectations. Lee Hopley, the head of economic policy at EEF, said: "The weakness in world markets has hit the manufacturing sector hard, but it looks like manufacturers are now close to the bottom of the cycle."

The areas of the sector worst-hit by the early stages of the global slowdown are showing the most noticeable improvements. Automotive companies and metals businesses are starting to show some tentative signs of progress, with output balances up by 23 and 16 percentage points respectively, albeit from a very low base. But transport, which was holding up well, is now the biggest faller, dropping from minus 16 per cent to minus 55 per cent. Electronics is also being hit by weak consumer spending. "Any green shoots are at the very earliest stages. There are more enquiries coming in, but few new orders and those that do come are for smaller volumes," Ms Hopley said.

With job losses accelerating and no let up in calls for aid British manufacturers urgently need a clearer understanding of government policy. "There is no clear framework outlining the Government's intentions towards the UK manufacturing base and making clear where and when it might intervene to support strategic aims," Ms Hopley said.