Manufacturers have seen a step down in activity compared with last quarter, with output expectations hitting their worst level for over a year.
The latest CBI monthly industrial trends survey, published today suggests that weak orders, in particular for exports, are the main cause of the problem.
According to a CBI statement, 26 per cent of firms predict a fall in output over the next four months whilst 21 per cent predict a rise. The balance of minus five per cent is the latest in a five-month series of data that indicates output has entered a more negative phase.
This decline is said to follow a persistently weak demand for over five years, with no sign of future improvements. In this latest survey, 46 per cent of firms said total orders were below normal and 16 per cent said they were above, resulting in a balance of minus 30 per cent.
Overseas demand is said to be particularly poor with export orders well below normal. The balance of minus 37 per cent compares with minus 34 per cent last month.
Firms are also said to be struggling to keep their stocks under control and re-balancing attempts are being hindered by weak demand. Stocks have again risen to levels more than adequate to meet demand. A balance of plus 19 per cent compares with plus 15 per cent last month and plus 20 per cent in January.
Price competition is also intensifying, with widespread price-cutting putting further pressure on profit margins. Price expectations for the next four months are the weakest since February 2002.
Ian McCafferty, CBI Chief Economic Adviser, said: ‘Output has slowed a gear over the last quarter, with persistently weak demand really taking its toll. Firms have reported their poorest output expectations for over a year and UK profitability remains under intense pressure.
‘With 42,000 job losses predicted this quarter and the hike in NIC’s just around the corner, we hope next months’ Budget does not contain more cost-raising measures. Manufacturers desperately need a Budget that helps in the long term, particularly on investment.’