Manufacturing faces more cuts

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Manufacturers will accelerate their job-cutting programme in the coming months as rising costs continued to devastate their profit margins, the CBI warned yesterday.

The employers group said its latest quarterly survey showed the gap between price rises and cost increases had widened to a near record level.

The level of order books fell while the number of firms working below full capacity hit a two-year high over the three months to January. However, there was a slowdown in the rate of decline in new orders, output and optimism for the months ahead.

The survey showed a net balance of 4 per cent of firms cut prices over the latest quarter while 23 per cent suffered a rise in costs. The gap of 27 percentage points was significantly above the long-run average of 12 points and just short of the record 28 points recorded in the October survey.

Ian McCafferty, the chief economic adviser to the CBI, said: "Conditions for manufacturers are getting increasingly tough as costs continue their seemingly inexorable rise but weak demand keeps prices down, squeezing already thin profit margins even further.

"The sustained high level of oil and sharply increased gas prices have driven up energy and raw material costs and manufacturers are continuing to respond by cutting employment to curb the wage bill and boosting investment in efficiency improving measures."

The CBI estimated manufacturers cut 25,000 jobs in the last quarter, taking the total cull for the year to 106,000.

Mr McCafferty urged the Bank of England to order a "modest" cut in rates.