Manufacturing confidence falls

Business confidence has declined in every

region for the first time since 2003, as new orders continued to fall - according to the latest quarterly Regional Trends Survey published this week by the

and

.

The fall in new manufacturing orders in the three months to July, continues a trend that began at the start of this year, but is now driven exclusively by the continuing slowdown in the domestic economy. By contrast, export orders, which had declined in the two previous surveys, rose in five regions in the past quarter, and stabilized in two others.

However, in four regions,

, the South East & London,

and East of England, the decline in export orders continues unabated. Two of these regions,

and the South East & London, are extremely pessimistic about prospects for export orders in the months ahead. This is in stark contrast to expectations of a further rise in five regions, led by the East Midlands,

and Yorkshire & the Humber.

The widespread downturn in new orders was especially marked in the South East & London, which registered its sharpest decline in orders for seven years. The region appears to be among the worst affected by the weakness in domestic demand that has emerged in recent months, and has also failed to benefit from the upturn in exports seen in some other areas. All sub-sectors of manufacturing in the region are affected, with the result that overall confidence, export optimism, output trends, employment decline and investment plans in the South East & London are among the most negative in the

.

Trends in manufacturing output over the past three months were very mixed.

experienced a sharp decline, the first in almost two years, and Yorkshire & the Humber also saw a sharp fall. But the South West saw an encouraging rise and the West Midlands, after a year of steep falls, saw a modest increase, reflecting strong performances in the metal manufacturing and food, drink & tobacco sub-sectors.

reported a modest increase in output for the fifth survey in a row, and there was also an increase in the North East, the first for over a year.

and

appear to have escaped the worst of the problems facing

manufacturing. In

, there was an upswing in total orders, employment and output in the past three months and investment plans are much less downbeat than in most other parts of the

.

Despite the sharp decline in output in

in the past three months, the proportion of firms working below capacity is far lower than in the rest of the

; employment has increased in each of the past five surveys and respondents expect further job creation in the next three months. Investment intentions for plant & machinery and buildings are firmly positive, in contrast to deep pessimism elsewhere in the

.

While employment contraction at the

level has moderated compared with the steep falls seen in 2002 and 2003, the pace of job losses in manufacturing continues unabated in the South East & London, East of

and

. These regions, along with the West Midlands and the

, are unsurprisingly, much more pessimistic about the employment outlook than the rest of the

.

According to Experian estimates based on the survey results, a further 18,000 jobs will be lost to manufacturing nationally in the current quarter, a large figure but still well short of the losses seen during the steep recession of 2001 to 2003. As in recent quarterly surveys, the South East & London is set to bear the largest absolute fall (7,000) and the largest decrease in percentage terms (1.1 per cent) followed by the North West (4,000 job losses) and the West Midlands and Yorkshire & the Humber (3,000 job losses each).

"This generally gloomy survey offers a slight silver lining, with the growth of companies' unit costs becoming more manageable,” said Doug Godden, CBI Head of Economic Analysis. “The South West has reported a reduction whilst everywhere else outside of

and

has seen slower cost growth.”

“Yet, despite this, firms are not enjoying a pick-up in profits, with their pricing power weakened in the face of tough conditions in the domestic market,” added Mr Godden. “Whereas, in April, factory gate prices increased everywhere outside the South West, this time, eight of the 11 regions are reporting net price reductions."