Manufacturers cut jobs as sector shrinks again

There was further confirmation of the darkening economic picture yesterday after new figures showed that the manufacturing sector had contracted for its second consecutive month in November, with output declining at its sharpest pace in more than two and a half years.

Activity across the UK's factories declined as companies scaled back production in response to lower demand both from within and outside the country, with the eurozone debt crisis hitting trends. Jobs were also cut, with employment in the sector declining at its fastest rate in more than two years.

The weakness was apparent in the survey of manufacturing purchasing managers' from the data provider Markit and the Chartered Institute of Purchasing and Supply (Cips). It showed that the key purchasing managers' index (PMI) stood at 47.6 last month, down from an upwardly revised figure of 47.8 in October to its lowest level since June 2009. A reading below 50 indicates the sector is shrinking.

Amid the gloom, there was some relief among economists who had expected weaker than reported trends. That, however, did not mask the grim auguries for the sector, which helped pull the UK out of recession, and the broader economy.

"Export orders, which UK manufacturers are increasingly dependent on, continue to decline as the eurozone crisis impacts demand in UK and Asia as well as Europe," the Cips chief executive David Noble said. "Worryingly, employees are already being affected by the downturn... With new orders and outstanding business falling, it seems likely there will be more job losses to come next year."

Along with staff, factories also cut back on purchasing and stock holdings. New orders fell for the fifth month running in November, while new export orders fell amid reduced demand form mainland Europe, the US and Asia.