Oil prices have fallen sharply in the first two months of 1998 and there is little prospect of a revival unless Opec members reverse recent quota and production increases, the Royal Bank of Scotland reported last week.
The causes are slow demand growth because of a warm northern winter and the slowdown in East Asia, coupled with rising stocks and the prospect of even higher exports from Iraq. At $14 per barrel profits will be hit, but new projects are unlikely to be scrapped.
Stock market valuations of engineering companies plummeted last year as the market took note of the rising value of sterling on these export-dependent companies.
The engineering and vehicles sectors have also suffered from a general de-rating, which has left the relative valuation of the general engineering sector below that of the automotive sector for the first time in 10 years.
Latest figures put Britain at the bottom of an international league of 17 countries investing in plant automation.
Japanese figures are inflated by the inclusion of simple ‘pick and place’ devices, but the UK still lags behind.