South west manufacturing declines

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Manufacturers across the south west are starting to feel the impact of recession.

Latest results from the business trends survey conducted by EEF, the manufacturers’ organisation, shows a significant deterioration in trading conditions over the last three months.

Whereas the south west was the only region in Britain to post positive output figures at the end of last year, now recession is beginning to bite, albeit at a slower pace than the rest of the country.

“The structure of the south west manufacturing base – particularly its aerospace and defence-related sectors – means that the downturn is still less marked than in other regions, but it is clear that there has been a significant deterioration over the last three months,” said EEF south west region external affairs advisor Clive Turner.

“There is simply no hiding the fact these figures make grim reading. The past three months have been extremely difficult for manufacturers, with markets at home and abroad showing decline.

“The priority for government remains getting credit flowing again and helping companies to invest. In addition, there is now an urgent need to support companies in hanging on to the skilled workers they will need for when the upturn comes. Government must now consider all possible avenues to help companies deliver alternatives to redundancy.”

EEF warns that manufacturing faces a significant squeeze for the rest of this year with only a minimal recovery in 2010.

Key results for south west England:

•    47% of respondents report a reduction in total output
•    54% say orders are down
•    44% report a reduction in numbers employed
•    44% are reducing capital expenditure
Only 20% of respondents reported an increase in new export orders, suggesting the global slowdown may have prevented the weaker pound providing a significant boost to export orders.

Given the speed and scale at which the downturn has hit manufacturing, firms are extremely pessimistic about the next three months.

Nationally, the forward-looking output and orders balances hit new record lows of -41% and -42% respectively. In response, EEF has downgraded its economic forecasts with manufacturing output falling this year by 8.6% with only a pick up of 0.2% in 2010. In engineering, output is forecast to decline by 10.9% in 2009 and by 0.9% next year.