Manufacturing More Woes

7th September 09 – Manufacturing more woes

The manufacturing sector amounts to 13% of the British economy and still employs 2.6 million people. Compared to a year ago, production is down 10%.

Manufacturing businesses that have fought to survive during the recession are on their last legs and 2,460 are expected to fail this year. A report by accountants BDO Stoy Hayward and the Centre for Economics and Business Research (CEBR) puts this figure as a forecast to compare with 1,600 failures in 2008 (up 54%). The average number of failures in the decade 1997 to 2007 was 1,263 so that if the forecast number materialises for this year, it will represent an increase over that ten-year period average of 95%.

Richard Snook, the senior economist at the CEBR, said “Business failures, like unemployment, generally lag the recession because businesses hang on as long as they can, but in many cases they run out of money.” How sad, how true. According to the Engineering Employers Federation, almost two-thirds of companies have frozen pay to avoid redundancies and cut costs as they fight for survival during the recession.

As has been noted earlier in this diary, it had been expected (hoped) that a weaker pound would boost exports of UK manufactured goods but so far there has been no real pick-up. As we have learned during the course of the last nine months or so, those developing economies such as China, have counter-balanced a drop off in exports with huge internal stimuli programmes of infra-structure capital projects. This has not happened in the UK where monetary policy has been adopted in the hope that eased credit channels would lead to self-help.

So far the only self-help seems to be one-way traffic. One way to the high-street bank.