13 February 2003 | Robin Parker
Manufacturers are bracing themselves for huge job cuts in the coming months as they cope with rising input costs and uncertainty over oil prices as war looms with Iraq.
The CIPS/NTC Research purchasing managers’ index for manufacturing, a composite indicator for overall market conditions, fell for the second month in January, to its lowest level in a year.
The index of 48.6, below the 50 mark that indicates no change on the previous month, was blamed largely on job losses.
The Confederation of British Industry (CBI) predicts 42,000 job losses in the first three months of this year, 12,000 more than it forecast in the quarter to December.
High-street retailer Boots last week announced the closure of a Lanarkshire factory with the loss of 1,000 jobs. And United Biscuits is likely to lay off several hundred staff when it shuts its Ashby de la Zouch plant.
The CBI’s regional trends survey revealed that confidence among manufacturers fell in every region of the UK for the first time in a year.
Industry is now pinning its hopes of a recovery on the Bank of England’s interest rate cut to 3.75 per cent, announced last week. National Statistics figures show the UK economy is growing at its slowest rate in a decade.
Accountancy firm BDO Stoy Hayward warned that businesses in all sectors were less optimistic about the economy than at any other time since the aftermath of 11 September 2001.
UK manufacturers’ orders fell at their sharpest rate in 14 months.
Firms also said raw material costs were rising and current high oil prices affected the cost of plastic and chemical products.
The future price of oil is likely to be influenced by the outcome of the potential conflict in Iraq.
A recent study from the Institute of Directors predicted a short, successful war for the West would cut oil prices to $20 a barrel and boost the US economy by 2.9 per cent.
But a prolonged conflict in Iraq could more than double prices to $60 a barrel.