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Factory gloom 'worst since 1980' Factory gloom 'worst since 1980'
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Declining demand for UK-manufactured goods and a fall in output has caused the sharpest single-quarter fall in manufacturing confidence in 28 years. Falling demand for UK-made goods and a drop in output has caused the sharpest single-quarter fall in manufacturing confidence in 28 years, a survey says.
In the past three months, 16% of manufacturers saw a rise in new orders but 46% said they had fallen. In the past three months, 16% of firms had seen a rise in new orders but 46% said they had fallen, the CBI's Industrial Trends survey said.
According to the CBI's quarterly survey, orders for UK-made goods have declined at their fastest rate since 1999 as domestic demand drops. It also found orders for UK-made goods had declined at their fastest rate since 1999 as domestic demand fell.
The outlook for the economy has been hit by the global financial crisis.The outlook for the economy has been hit by the global financial crisis.
Further problems
The drop in new orders was largely due to weaker domestic demand, which recorded its sharpest fall since 1992.
The slowdown in the UK economy is now spreading to sectors previously resilient to the weakness in the banking and housing markets Ian McCafferty, CBI chief economic adviser
The credit squeeze is also having a considerable effect on the prospects for manufacturers' businesses as they encounter greater lending problems.
Many firms planning to reduce spending on machinery and buildings over the next year and the number looking to cut back is the highest since the early 1980s. Some 9% said output was likely to be limited by credit or finance difficulties in the coming three months.
Prospects for employment are not any rosier and many manufacturers foresee making job cuts. In total, the CBI predicts 23,000 manufacturing jobs will be shed in the third quarter and that this number will increase to 42,000 in the fourth quarter.
Meanwhile, firms perceptions of their total order book levels deteriorated over the quarter to their lowest point since 2003.
"This survey was conducted during a period of exceptional economic turbulence, so it is unsurprising that confidence has taken such a hit," said Ian McCafferty, the CBI's chief economic adviser.
"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."
He said that he hoped the recapitalisation of banks and the recent cut in interest rates would prevent a further credit squeeze over the winter.