Factories fear for falling orders in face of eurozone crisis worries

By PETER RANSCOMBE
Published on Monday 6 February 2012 00:00

ONGOING concerns about the eurozone debt crisis and the ensuing political uncertainty have dented confidence among Britain’s small manufacturing companies, the CBI will warn today.

Factory output has stagnated over the past three months and is expected to flatline again in the next quarter.

Domestic orders fell and are predicted to do so again, while exports fell for the second quarter running.

Concerns over economic conditions overseas have risen sharply in the latest survey, with one-third of firms believing this would limit export orders.

Lucy Armstrong, chairwoman of the CBI’s SME Council, said: “Sentiment among small and medium-sized manufacturers fell sharply again in the past three months, which has led to falling orders and stagnant output.”

The CBI’s latest quarterly SME trends survey will make for worrying reading for members of the Bank of England’s monetary policy committee (MPC), who must decide at their meeting on Wednesday and Thursday how much cash to pump into the UK economy.

Economists believe that “printing money” in this way will free up cash for the banks to start lending to businesses, including small manufacturing companies.

Figures released last week by the Chartered Institute of Purchasing & Supply (Cips) and analysts at Markit suggested the UK economy got off to a better-than-expected start to the year.

On Friday, the pair’s purchasing managers’ index (PMI) showed the powerhouse services sector of the economy had grown at its fastest pace for almost a year, while the manufacturing PMI also returned an up-beat assessment.

The positive readings had prompted some analysts to suggest the UK economy may avoid a double-dip recession.

But today’s CBI survey will call into question some of the optimism in the manufacturing sector.

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