04 August 2005
Price rises for raw materials eased over the second quarter of 2005, but remained high, according to the Confederation of British Industry (CBI).
The group's quarterly industrial trends survey also found overall business optimism fell for the fourth consecutive quarter amid inflated raw material costs and low consumer demand.
Ian McCafferty, CBI chief economist, forecast price cuts and about 18,000 UK job losses over the next three months.
"It's still tough out there. But quarter two was not as difficult as quarter one. The squeeze on profit margins remains tense but cost pressures may be easing," he said.
The study said input costs rose at their slowest rate for 15 months, despite manufacturers facing sharp increases in oil prices to above $60 a barrel in July.
Despite a 9 per cent rise in export orders, assisted by the pound's recent fall against the dollar, UK firms expect orders to fall in next quarter.