Breaking finance and business news, tax information, jobs and more for finance directors and senior finance professionals.

The Confederation of British Industry (CBI) has this morning released its report on UK manufacturing - revealing the fastest quarterly fall in total new orders since January 1999.

Orders for UK made goods have fallen at their fastest rate since 1999, as both domestic and overseas orders are hit by the global economic slowdown todays CBI survey reveals.
 
The latest quarterly CBI Industrial Trends survey shows that declining demand for manufactured goods, coupled with a sharp fall in output, has resulted in the sharpest single quarter fall in manufacturing confidence for 28 years.
 
In the last three months, 16 per cent of manufacturers reported a rise in new orders while 46 per cent said they had fallen. The resulting balance of -30% signalled the fastest quarterly fall in total new orders since January 1999.

Much of this was driven by weak domestic demand. A balance of -38% of firms reported falling domestic orders, the sharpest fall since January 1992.
 
Export orders, which in previous surveys had been supported by the depreciation of Sterling, also fell (a balance of -19%) as the global economic slowdown suppressed demand.
 
Firms’ perceptions of their total order book levels deteriorated over the quarter with a balance of -39% reporting levels below normal, the lowest since October 2003.
 
Manufacturing output fell at the fastest rate in ten years, with a balance of -29% of firms recording a drop in the last three months. Manufacturers see no let-up in the coming quarter with output (-31%), domestic orders (-42%) and export orders
(-21%) all expected to fall further.
 
Falling orders and output appear to be weighing heavily on manufacturers’ sentiment. Four per cent were more optimistic about the general business situation than three months earlier against 64% who were less so. The resulting balance of -60% represents the fastest fall in confidence since July 1980.
 
The survey reveals that more difficult lending conditions following the global credit squeeze are acting as a brake on manufacturers’ investment plans. The balances of respondents planning to reduce capital spending on buildings and machinery over the next twelve months are the highest since the early 1980s.
 
Sixteen per cent of firms cited the availability of external finance as a constraint on investment, well above the four per cent recorded in July and the highest figure since the question was first asked in 1979. The cost of finance is also increasingly seen as a constraint, cited by 8% in the past three months, up from 5% previously. However, firms increasingly view uncertainty about future demand as the most important factor curtailing investment plans (58% is the highest level recorded since July 2003).
 
Nine per cent of firms said their output was likely to be constrained by credit or finance in the coming quarter, the highest figure since 1975.
 
The number of job losses during the quarter was not as steep as firms had predicted in the previous quarterly survey, with a balance of -15% cutting staff. However, more jobs are expected to go in the next three months with a balance of -33% predicting they will reduce employment. Based on the survey results, the CBI forecasts 23,000 manufacturing jobs will be lost in the third quarter, rising to 42,000 in the fourth quarter.
 
Drop in price pressure

Price pressures have softened over the last quarter, and are expected to ease further in the face of slower growth in unit costs and weaker demand. Domestic price inflation eased (a balance of +21% down from +27% in July) and is expected to fall back even more sharply over the next quarter (a balance of +10%).

Meanwhile export price inflation in the three months to October was, with a balance of +19%, similar to that of earlier in the year, but is expected to slow slightly in the next three months (balance of +14%).
 
Ian McCafferty, the CBI’s Chief Economic Adviser, said: “This survey was conducted during a period of exceptional economic turbulence, so it is unsurprising that confidence has taken such a hit. However, the sharp falls in orders and output show that the slowdown in the UK economy is now spreading to sectors previously resilient to the weakness in the banking and housing markets.
 
“It is also of serious concern that constraints on capital now appear to be affecting manufacturers, in a way that had not been the case earlier.
 
“We can but hope that the recapitalisation of banks and the cut in interest rates, which took place just as the survey closed, will prevent a further credit squeeze over the winter.”