More than 100,000 engineering jobs will be lost in Britain over the next 12 months in a final, vicious aftershock from the sustained high value of sterling, according to a forecast out yesterday.
After a year when profit margins have been hit hardest by the high pound, the fall-out will spread to affect thousands of jobs in engineering in 1999 and 2000, the forecast predicts.
‘It is a falling-off-the-cliff phenomenon. There will be a haemorrhaging of labour,’ warned an official from the Engineering Employers’ Federation, which commissioned the report.
The EEF/Business Strategies figures predict a recovery in exports in the second half of next year.
But some economists warn that the picture could be even blacker next year.
‘This forecast could be a bit optimistic,’ said Liz Amos, director of the Institute for Manufacturing. ‘They are expecting interest rates and the exchange rate to fall next year. And they have not factored in the full level of uncertainty surrounding Asia, Russia and the euro.’
Alan Armitage, chief economist at the EEF, said the forecast was a clear indication of the gravity of the situation faced by manufacturing industry.
‘The message here is that interest rates should continue to be reduced. If that unglued the pound further, we may see benefits in the second half of next year.’
Unemployment will be most severe in the metal products, machine tools, mechanical and electrical equipment sectors, where jobs lost could account for up to 8% of the workforce.
Engineering output has slowed abruptly, plummeting from 3.5% growth last year to less than 1% this year. Output next year is predicted to move into the red, falling by 1%.
‘Confidence is being hit. There are already signs of things slowing up in machine tool orders,’ said Mike Legg, president of the Machine Tool Technologies Association. ‘Projects are getting postponed and delayed.’