Electronics, chemical and pharmaceutical companies are expected to outperform a sluggish manufacturing sector over the next two years, according to a report out this week.
Output in the manufacturing sector will grow by 1.5%, compared with 2% for the economy as a whole, according to the report by forecasting group Cambridge Econometrics. The strength of the pound against the euro is the main factor holding manufacturing back.
There will be much faster growth in some sectors. WAP mobile phones, digital television and e-commerce are expected to drive electronics growth.
The chemicals industry, expected to grow by 3% this year, should benefit from a move away from commodities towards more added-value products. And bio-technology will increase output in the pharmaceutical sector.
Companies performing well are typically in markets where technology or fashion are driving growth and price is less of a significant factor, said Rachel Beaven, manager of Cambridge Econometrics’ industrial service.
Manufacturing employment is at its lowest level since 1990 and the drive for increased productivity due to intense international competition is likely to squeeze employment further, by 2% in 2000 and 3% in 2001.
The findings are in line with the Confederation of British Industry’s latest forecasts. The CBI revised down its growth expectations for 2000 by 0.1% and expects annual growth to decline in 2001. Domestic demand is expected to underpin any growth but exports will remain weak.
Kate Barker, the CBI’s chief economic adviser, said: `The strength of sterling is forcing manufacturing to cut back on investment plans and if investment declines, as we expect, this could constrain growth over the long term.’
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