Manufacturing fall prompts Tory attack

Manufacturers' profits plunged to their lowest level in two years during the fourth quarter of last year, official figures showed yesterday.

Manufacturers' profits plunged to their lowest level in two years during the fourth quarter of last year, official figures showed yesterday.

The downturn dragged down the manufacturing sector's track record during the past seven years, prompting the Conservatives to launch a fresh attack on the regulatory burden imposed by the Government on manufacturers.

Manufacturing companies' profitability has almost halved during Labour's tenure since peaking in 1997. The sector's net rate of return - a comparison of profits and the amount of money firms invest in capital goods such as machinery - fell to 6.9 per cent last year from 13.1 per cent seven years ago.

The figures, from the Office for National Statistics, show that manufacturing profitability has fallen in six out of the seven calendar years (from 1998) that Labour has been in power.

Oliver Letwin, the shadow Chancellor, said: "The fall in manufacturing profitability is yet another indication of the problems caused by excessive tax and regulation. With 15 new regulations every working day and 66 tax rises, it is hardly surprising that manufacturing has seen profitability fall and productivity growth rates have fallen by a third."

Manufacturing profitability dropped from 7.1 per cent in the third quarter to 6.1 per cent in the fourth quarter, hit by record oil prices and the strength of sterling. Steve Radley, the chief economist at the Engineering Employers' Federation, said: "Profits have been squeezed by rising global competition and increasing costs, both of which show no sign of easing."

A Treasury spokesman defended the Government, saying overall corporate profitability increased during 2004. For the full year, corporate profitability recorded its best result since 1998 at 13.4 per cent.