Poor UK trading hits machines

Europe’s largest machine tool maker, the 600 Group, issued a profits warning this week as redundancy costs and poor trading conditions threaten to hit its results for the year. The move came as official figures out this week showed manufacturing investment falling for the third successive quarter, and employment in the sector still falling. Investment […]

Europe’s largest machine tool maker, the 600 Group, issued a profits warning this week as redundancy costs and poor trading conditions threaten to hit its results for the year.

The move came as official figures out this week showed manufacturing investment falling for the third successive quarter, and employment in the sector still falling. Investment in the engineering and vehicles sectors was hardest hit, down by 21.9%.

Tony Sweeten, chief executive of the 600 Group, which reported sales of £150m last year, said: ‘The head of steam that we were hoping and praying for is not going to occur because of lack of confidence in the UK market.’ But he believes the trading situation for machine tools has reached rock bottom and will improve later in the year.

Some 60 jobs were shed at 600 Group’s UK manufacturing sites at the start of the year, with a further 100 going at its South African manufacturing operation, which has been closed. The moves cost the group some £500,000 in restructuring costs, it disclosed this week.

Forecasts for the Machine Tool Technologies Association predict a 25% downturn in UK machine tool sales this year, with business picking up in mainland Europe as these economies recover. The US market remains flat.

Oxford Economic Forecasting has predicted a downturn bottoming out in 2000, but of less severity than that of the early 1990s.

Some observers have warned that continued under-investment in British industry will seriously hamper prospects for the UK if it joins the euro-zone.

‘You have to invest in technology to be competitive,’ said Elaine Barnett, economic adviser at the Institute for Manufacturing. ‘Firms will have to invest if we are to go into the euro.’

Sweeten said 600 Group’s cash reserves would allow it to continue with product development programmes, as well as stepping up moves into mainland European markets, following acquisition of French and German distributors since December last year.