Output of UK factories hit by euro woes

Tim Wallace
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MANUFACTURING has been hit by the Eurozone crisis, and output may decline this quarter according to the Confederation of British Industry’s (CBI) quarterly trends survey.

Business optimism has fallen for the second consecutive quarter. The net balance of firms feeling more optimistic than they were three months ago fell to minus 30 per cent from minus 16 in July.

Total new orders increased by six per cent in the third quarter, but companies expect a decline of 10 per cent in the current month period.

Manufacturing output rose by an estimated 0.2 per cent over the third quarter, and is expected to fall 0.6 per cent in the fourth. In terms of jobs, around 8,000 were created in the last three months, but 4,000 will go by the end of the year, the survey suggests.

“The lack of global political leadership and in particular the Eurozone crisis have knocked confidence,” said Ian McCafferty from the CBI.

McCafferty stressed that the next two weeks of EU negotiations are vital for business confidence, investment and jobs, but that “even with a very good result from the summit and negotiations, it would still take a bit of time for confidence to recover.”

However, lower investment expectations were registered in earlier surveys.

“The fall before the third quarter is largely down to consumer spending being squeezed by inflation,” said McCafferty. “Central government cuts have yet to start – overall spending has risen over 2011 and so cannot be seen as a main cause of the decline in expectations so far.”

McCafferty stressed the need for supply side reforms to free up the UK’s economy and boost growth. Issues like planning reform and a need to cut the administrative burden involved in running a business are key, he said.

Manufacturers’ group EEF said pay settlements have held steady, meanwhile, averaging 2.5 per cent in the three months to September.