Manufacturing is now in recession

The slowdown in the world economy and the recent slump in the electronics sector have finally pushed UK manufacturing into recession!

The slowdown in the world economy and the recent slump in the electronics sector have finally pushed UK manufacturing into recession, the Engineering Employer’s Federation said this week.

The industry body has slashed its growth forecasts for both engineering and the rest of manufacturing, as the global downturn and the continued weakness of the euro take their toll.

Speaking at the launch of the EEF’s quarterly engineering outlook survey, Stephen Radley, chief economist, said engineering contracted by 1% in the first three months of the year, and prospects for output, orders, exports, employment and investment have all fallen sharply. ‘It is now almost certain that engineering is in recession, along with the rest of manufacturing.’

The EEF has cut its engineering growth forecast sharply, from 3.2% three months ago to just 0.7%, the lowest figure since 1993.

The most dramatic turnaround in fortunes has been in the electronics and electrical engineering industries, where growth has taken a nosedive. This has led to thousands of job cuts, such as those at Motorola’s mobile phone factory at Bathgate in Scotland.But it is not just engineering and manufacturing that are suffering, Radley warned.

During the last six months, over 40% of the total UK economy has shown worsening figures, increasing pressure on the Bank of England to cut interest rates. ‘It would be a mistake to believe the UK economy is powering ahead on all fronts. As well as the considerable problems in engineering and manufacturing, over the coming months the economy as a whole will need a cut in interest rates.’

During the second half of 2001, job cuts in engineering and manufacturing will increase, as the slower world economy further dampens growth, he said. With the US struggling to shake off its slowdown, the German economy faltering and Japan close to recession, none of the major economies are forecast to grow by more than 1.5% this year.

‘There is a huge amount of uncertainty out there, and a lot rests on what happens in the US. Most European countries, notably Germany, lack internal forward momentum. So, all-in-all, there is no real motor for growth in the world economy.’But despite the gloom, engineering growth should recover to 2.2% in 2002 as world trade improves, Radley added.

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