UK: JOBS THREAT TAINTS GROWTH HOPE. - While UK order levels continue to improve compared with those of Germany and France, there are pockets of gloom with job losses predicted in engineering and the car industry.

Last Updated: 31 Aug 2010

While UK order levels continue to improve compared with those of Germany and France, there are pockets of gloom with job losses predicted in engineering and the car industry.

Inflation in the UK rose to 2.5% in January from 1.9% in December last year - the biggest rise for more than two years. The underlying inflation rate, which excludes mortgage interest payments, rose slightly from 2.7% to 2.8%, still below the Bank of England's forecast of 3%.

- The Engineering Employers Federation predicts the loss of a further 47,000 jobs this year in the UK engineering industry, bringing the total number lost in the sector since 1990 to more than 400,000. Nissan, last year's top car exporter from the UK, produced 36,000 fewer cars than planned because of recession in Europe. The workforce at Sunderland is expected to be reduced by 600 to 4,000 this year. Production output is expected to return to near-normal, five-day and three-night shifts.

- Manufacturing output in electronics and motor vehicles is forecast to grow by over 2% this year. Engineering output is expected to grow only slightly and output in aerospace is set to continue its downward trend. Manufacturing output in the UK (excluding oil and gas) fell by 0.5% in December, raising fears about the strength of the recovery. But the quarterly trend is still upwards. In the fourth quarter last year it was 0.5% higher than in the third quarter and 22% higher than the same period a year earlier.

- A recent Mori survey showed that investment in R and D came bottom of the list in UK manufacturers' plans. Investment in IT came top, particularly in manufacturing management and supply chain systems.

- Order books in UK manufacturing continue to show signs of improvement, not withstanding a dip in the last quarter of 1993. In comparison, those in Germany and France continue at or near their lowest levels. Stocks of finished products in the UK show a downward trend as order levels improve.

- Ford is increasing production in the UK to meet rising demand in the home market, despite continued recession in Continental Europe. Ford's UK sales rose by 18% in the first two months of this year. Escort production at Halewood, Merseyside will increase from one shift to two, four days a week. The van plant at Southampton is returning to full, five-day production - the first increase in production since the middle of last year when Ford first introduced short-time working plants.

- Industrial strike action, once the so called 'British disease', is now affecting Germany and France. Air France faces massive job cuts - and industrial action - in order to stem losses which reached nearly FF8 billion in 1993. A full-scale strike was narrowly averted last month in Germany when the powerful IG Metall union agreed to a modest 2% wage increase, well below initial demands of 5.5-6% (inflation is 4%). Employers had demanded a wage freeze and a restriction on some employment benefits. The deal reflects rising concern about the economic recovery and levels of unemployment in Germany.

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