CBI finds gloom among manufacturers

The UK manufacturing sector looks to be holding up well despite the recent credit market turmoil – but that hasn’t stopped bosses getting gloomier.

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Last Updated: 06 Nov 2012

 

According to the CBI’s latest Industry Trends survey, published on Tuesday, companies are still worried there are more serious problems around the corner – despite no sign of demand waning. The proportion of firms who are more pessimistic than they were three months ago outstripped the optimists by 13%, which is the biggest difference for nearly two years.

The good news first: more than a quarter of firms saw an increase in total orders, while the proportion of firms recording higher export volumes was 6% higher than those reporting lower volumes – although most respondents were expecting these to drop in the coming months, as the credit crunch bites.

Investment plans for the coming year were slightly down, but not because credit has dried up – most companies said there was plenty of financing available if they wanted it.

So why the long faces? One of the major problems is the ever-increasing cost of commodities, which is putting the squeeze on profit margins. ‘Cost pressures are driven by higher prices for crude oil and rising food costs… so far the majority of businesses have been unable to pass these onto customers’, said the CBI’s Ian McCafferty.

For the 3m people working in the manufacturing sector, the news was mixed. Some 7,000 jobs were lost last quarter, according to the CBI, with a further 10,000 expected to go before Christmas. However, bosses are also worried that skill shortages are going to be the biggest constraint to their business – which means that the proportion of firms expecting to boost their training budgets have hit their highest level for nearly 10 years.

The CBI has its hands full at the moment. It has joined forces with other business lobby groups to try and persuade the Government to back-track on its abolition of taper relief – and apparently received some encouragement from the Chancellor yesterday that limited concessions may still be possible. So it will be grateful that the news from the manufacturing sector is not worse.

Ultimately we’ll be the ones who decide whether these firms are right to be gloomy. As long as we keep spending our hard-earned cash on goods and services, they should be fine (and the CBI might even put out a cheerful press release for once). But if we stop, then the doom-mongers in the sector will have good reason to say ‘I told you so’…

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