Manufacturing confidence hits 12-year low

Mar 16 2009 by Alun Thorne, Birmingham Post

The optimism of the UK’s manufacturers is at its lowest point in 12 years as order books collapse and access to finance remains difficult, according to BDO Stoy Hayward’s Manufacturing Optimism Index.

Manufacturing optimism levels were at 81.9 in February 2009, down from 82.1 in January 2009 – the lowest point since records began collation in 1997.  The highest optimism level on record is November 1999, with a lofty 103.3.  The index is scaled so that 100 equates to trend annual growth of 2.5 per cent, 110 equates to the late 1980s boom and 90 equates to the trough of the previous economic cycle in 1991.

Tom Lawton, Head of Manufacturing at BDO Stoy Hayward, said: “For many months now most manufacturers have seen a consistent fall in new orders and have been either reducing working hours or staffing to try to keep their heads above water.  With order books continuing to diminish, the future looks as if it will bring little respite.

“The credit crunch started as a financial crisis that has rapidly expanded to the real economy. Manufacturing is being hit hard due to lack of funding, high capital requirements, slashing of investment budgets and consumer spending on durable goods. This has led to a startling de-globalisation of product markets and collapse in world trade.

“Manufacturers’ short term actions should be focused on maintaining cash reserves and keeping an updated but robust set of profit and cash flow forecasts.  In addition, cost saving exercises and inventory reduction will go a long way to helping manufacturers through the tough year ahead.”