Morose manufacturers crush confidence

Two separate surveys have found that business confidence has plummeted, putting recovery at risk.

by Emma Haslett
Last Updated: 06 Nov 2012
More signs this morning that the recovery is likely to be longer and more drawn-out  than expected: two separate surveys have suggested that business confidence has dropped over the past few months. While accountancy firm BDO’s Business Trends Index has dropped from 95.6 in June, to 95.1 in July (to put that into context, that’s its lowest level since January), the Chartered Institute of Personnel and Development indicates that’s going to hit the jobs market hard: its net employment index, which compares the number of employers planning to recruit with those planning to make redundancies, has fallen to -1 over the past three months, down from +3 in the previous quarter. In short: it’s not looking good…

The interesting thing about both surveys is that they suggest this is largely thanks to a decline in confidence among manufacturers. So while the BDO figures suggest the manufacturing sector has now contracted for the second month in a row, the CIPD’s survey found the industry’s plans to increase the number of jobs has fallen from a decidedly optimistic +32 three months ago, to just +11. Now, that’s obviously still a positive thing – but given the Government has pinned many of its hopes for recovery on a return to ‘Made In Britain’-style manufacturing, it’s still not positive enough.

As for the rest of the figures, the CIPD survey shows that confidence among public sector employers is still lingering in the doldrums, at -51, compared to -52 three months ago. Of course, given the Government’s frantic cost-cutting, that’s to be expected – but what’s more worrying is that the private sector’s confidence has dropped, from +32 in the previous quarter, to +23. That suggests optimism among private sector employers isn’t as high as the Government would like, if it’s to absorb all those from the public sector who have lost their jobs.

Gerwyn Davies, the CIPD’s public policy adviser, points out that businesses need improved access to finance to help them grow. But that doesn’t paint the entire picture: with the prices of raw materials rising and the pound remaining stubbornly low, costs for businesses are going up, meaning the idea of paying new salaries or investing in growth is less attractive than it once was. Which doesn’t bode at all well for the prospects of recovery. Happy Monday…

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