CBI predicts hard times for manufacturing sector

THE CONFEDERATION of British Industry yesterday warned that the manufacturing sector was on the brink of recession, with companies in the North-east worst hit by the economic slowdown.

Manufacturers in all regions of the UK experienced falls in demand and output over the last four months, and most are gloomy about prospects for the remainder of the year, according to the latest CBI/Business Strategies survey of regional trends. Sudhir Junankar, CBI associate director of economic analysis, said: "If expectations are borne out, than that would suggest we are entering a manufacturing recession."

Andy Schofield, senior economist at the consultancy Business Strategies, said: "These results confirm that no region is immune, with falls in output, demand and prices all contributing to ebbing confidence."

Over the past four months, manufacturing output in six regions - the North, Yorkshire and the Humber, the South-west, the North-west, Wales and Northern Ireland - fell by the sharpest rate since 1991, when the country was in the grip of recession.

Total orders fell by more than expected in over half of the regions, while manufacturers in all regions but Northern Ireland reported falls in employment.

Mr Junankar said: "Further falls in orders and sharply falling confidence levels reflect the continuing battle manufacturers face."

Looking ahead, the outlook for manufacturing remains bleak. Over the next four months, manufacturers in all 11 regions believe output and employment will fall. Firms in 10 regions expect to reduce plant and machinery investment, with only manufacturers in Wales expecting to maintain current investment levels.

Confidence among manufacturers in the North - one of the worst hit regions - has slumped to levels last seen at the end of 1990. Most manufacturers, however, are less gloomy about exports, after recent falls in the pound.

The CBI said: "The fall in the level of sterling against the mark was reflected by a less pronounced decline in confidence. The proportion of firms citing prices as a constraint on exports dropped in over half the UK regions".

Last week's cut in interest rates was a "glimmer of light" for UK manufacturers, according to Mr Junankar.

He raised doubts about the Government's latest forecasts, which predict the UK economy will grow between 1 per cent and 1.5 per cent in 1999. Mr Junankar said: "They seem to be a little on the optimistic side".

Outlook, page 19