Slump in demand

Demand for UK-manufactured goods has slumped at its fastest rate in 30 years over the past three months as output has seen a record decline, the CBI has said.

Demand plummeted in the last quarter, with 60 per cent of companies reporting a fall in the volume of orders compared with the previous quarter and 13 per cent reporting an increase.

The resulting balance of -47 per cent is the lowest since October 1980 (-61 per cent).

The very sharp falls in demand have resulted in continued job losses. Employment fell at the sharpest rate (a balance of -48 per cent) since October 1991 (-49 per cent) and companies expect to continue making job cuts, albeit at a slightly slower pace, next quarter (-39 per cent).

Based on the survey, the CBI estimates that 62,000 jobs were lost from the sector in the first quarter and that 51,000 will be lost in the second quarter, bringing the total employed in manufacturing to 2,666,000.

Ian McCafferty, the CBI’s chief economic adviser, said: ‘The first quarter of 2009 was extremely tough for UK manufacturers but this survey shows firms hope that the worst may be behind them, with the pace of decline slowing slightly.’

Over-capacity is a growing problem for manufacturers. The highest proportion of companies since January 1983 is now working below capacity (76 per cent) and the least number of companies since 1983 are planning to invest to expand capacity.