The manufacturing downturn is over, declares CBI

The manufacturing downturn in the UK is over, according to the Confederation of British Industry. The CBI`s latest quarterly industrial trends survey, published in January, shows the strongest growth in orders for more than seven years, the strongest growth in output for more than eight years, and the first increase in confidence for 18 months.

But the CBI cautions that the improvement is from an extremely low base, following years of industrial contraction. Jobs are still being lost, two-thirds of firms are still working below capacity, and there is continuing pressure on prices.

Some 30% of the survey respondents saw orders rise over the past three months, compared to 17% reporting falling orders. Output has increased for the first time in three years and exports have increased for the first time in more than seven years.

The survey also shows that companies plan to increase their investment in plant and machinery for the first time in six years, as well as spending more on training and innovation.

"The manufacturing sector is, at last, on a path to recovery and firms clearly believe that the worst is behind them," says Ian McCafferty, the CBI`s chief economic advisor. "The recovery now depends on the positive expectations for the coming quarter being realised, so manufacturers are hoping that the Bank of England continues its gradualist approach to raising interest rates."

• The latest official statistics show that the UK`s manufacturing output rose by 0.2% in the fourth quarter of 2003 compared to the previous quarter, and was 1.1% higher than the same period a year ago. Output rose by 1.9% in the chemical industries and by 1.2% in the paper, printing and publishing industries, but fell by 4.4% in the textiles, leather and clothing industries, and by 1.4% in the electrical and optical equipment industries. The figures, from National Statistics, show that for 2003 as a whole, manufacturing output was flat.