No end in sight to misery of factory jobs cull

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FACTORY BOSSES in every region of England and Wales expect to cut jobs in the coming months to cope with a surge in their costs, the CBI warns today.

The UK's largest employers' body forecast that 26,000 more manufacturing jobs would be axed in the first three months of the year - an annual rate of more than 100,000. London and the South-east are likely to bear the largest falls, with "considerable" declines expected in the North-west, the East Midlands, the North-east and the east of England. Only Scotland will avoid employment cuts.

It said that costs had increased "sharply" over the past quarter while confidence has fallen in most parts of the UK, according to its survey of 736 firms conducted with Experian, the business strategy group.

There was little sign of improvement in employment, as the CBI said an average of 26,250 jobs were cut in every quarter last year. However, it said that was still short of the losses experienced during the steep manufacturing recession of 2001 to 2003. The survey showed manufacturers blamed the increased cost of oil, metal and other raw materials.

Doug Godden, the head of economic analysis at the CBI, said: "Manufacturing confidence has been hit in most parts of the UK. Costs have risen sharply and job cuts are on the horizon. There is a mixed picture across the UK economy as a whole and the Bank of England should hold interest rates steady for the time being. This survey highlights the renewed difficulties facing important parts of the economy and there is certainly no justification for a rate rise at this time."

Peter Gutmann, of Experian, said: "The fall in business confidence and export optimism highlights uncertainties among manufacturing firms following weak trends in export orders in recent months. While many economic forecasts assume a robust pick-up in exports this year, firms at the sharp end seem no longer to believe that a buoyant international backdrop will necessarily produce this."

The data is a breakdown of headline numbers already published by the CBI and is unlikely to influence the Bank's Monetary Policy Committee, which starts its two-day interest rate meeting today.

All 50 City economists polled by Reuters expected the MPC to leave rates on hold, although a slim majority forecast one more rise this year. Howard Archer, at Global Insight, said: "The odds have shifted towards the next move being a rise in rates, which we believe is likely around May." But Ciaran Barr, at Deutsche Bank, said: "We believe that the next move in rates will be downwards, the first cut coming in the second half of this year."