26,000 job losses?

Manufacturing costs rose sharply over the past three months in all but one UK region and firms now predict 26,000 first quarter job losses across the UK.

Manufacturing costs rose sharply over the past three months in all but one UK region and firms now predict 26,000 first quarter job losses across the UK, according to a new regional trends survey published today by the CBI and Experian.

The survey also shows that confidence has fallen in eight of the UK’s eleven regions over the past quarter.

The CBI makes clear that with manufacturing struggling and a mixed picture for the economy at large, the MPC should decide to “hold interest rates steady” when it meets today.

Based on the survey respondents, the CBI and Experian predict 26,000 jobs will be lost over the coming quarter, with only Scotland escaping employment cuts. The South East & London is set to bear the largest fall, with considerable declines also expected in the North West, the East Midlands, the North East and the East of England. While 26,000 jobs is a large figure it is still short of the losses seen during the steep manufacturing recession of 2001 to 2003.

The price rises of oil, metal and other raw materials seen in 2004 led to overall manufacturing costs rising sharply over the past three months, with only the South East & London avoiding an increase. Further cost increases are now expected in every region over the coming quarter.

Confidence has fallen in all but three regions with the sharpest fall over the past three months recorded in the West Midlands. Marked declines were also recorded in the South East & London, the South West and Yorkshire & the Humber – the most severe falls since the recession of 2002. But two regions stand out from the general gloom, with Scotland and the North East recording an increase in confidence.

Total orders fell at the national level over the past quarter, with the sharpest decline recorded in Northern Ireland. Orders also fell markedly in the West Midlands, the North West and the North East. But Scotland bucked the trend with its largest rise on record. Orders also increased in Yorkshire & the Humber, the East Midlands and Wales.

The past three months also saw a widespread fall in export orders. This will disappoint manufacturers, given the strength of global activity and international trade. Export orders in the West Midlands and the North West fell at the fastest pace for three years. Large declines were also recorded in Northern Ireland and the South West. Only Scotland, Yorkshire & the Humber and East of England avoided declines in export orders.

Peter Gutmann of Experian said: “The fall in business confidence and export optimism highlights uncertainties among manufacturing firms following weak trends in export orders in recent months. Last year saw the fastest global growth for three decades, record expansion of international trade and modest sterling easing against the Euro. Yet UK manufacturing exports rose by just two per cent. While many economic forecasts assume a robust pick up in exports this year, firms at the sharp end seem no longer to believe that a buoyant international backdrop will necessarily produce this.”

Doug Godden, CBI Head of Economic Analysis, said: “Manufacturing confidence has been hit in most parts of the UK. Costs have risen sharply and job cuts are on the horizon. There is a mixed picture across the UK economy as a whole and the Bank of England should hold interest rates steady for the time being. This survey highlights the renewed difficulties facing important parts of the economy and there is certainly no justification for a rate rise at this time.”

The results of the CBI/Experian Regional Trends were taken from the 736 replies to the CBI’s Quarterly Industrial Trends Survey received between 13 December 2004 and 12 January 2005.

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