LONDON--Confidence among U.K. manufacturers has weakened in
recent weeks, with the outlook in the sector for the coming months
more downbeat than at any time this year, a quarterly survey by the
EEF manufacturers' organisation showed Monday.
The growing pessimism adds to pressure on Chancellor of the
Exchequer George Osborne ahead of his autumn budget statement Dec.
5, when he is expected to lower his economic and fiscal forecasts
for the country. In its survey, the EEF once again urged Mr.
Osborne to launch supportive policies to help lift this key sector
and boost economic growth.
A separate business survey Monday by Lloyds Bank (LLOY.LN)
highlighted the difficulties experienced across the wider business
landscape, with firms reporting that November trading was stronger
than in October, but still weaker than at any time in the third
quarter. Firms said their expectations for economic growth were
unchanged in November from October.
Manufacturers surveyed by the EEF said they expected output in
the sector to contract 1.2% in 2012 and grow just 0.7% in 2013, a
steep cut from its previous forecast of 1.5% growth as orders have
slowed.
Total U.K. gross domestic product, meanwhile is expected to
contract 0.1% this year and grow just 1.2% next.
"There is little positive news in these figures," said EEF Chief
Executive, Terry Scuoler. "We've seen growth ebb away during the
course of the year and many manufacturers are steeling themselves
for a continuation of tough trading conditions in the next few
quarters. The extent to which industry confidence has fallen since
this year's budget makes it ever more urgent for the government to
get to grips with growth and get behind companies seeking to invest
and succeed in new export markets."
The U.K. economy posted a surprise 1% quarterly expansion in the
third quarter, ending three straight quarters of contraction.
However, despite some upbeat consumption figures in the past week,
economists and some members of the Bank of England's monetary
policy committee are bracing themselves for a weak gross domestic
product figure in the fourth quarter of this year.
In a written annual statement, BOE member Martin Weale said that
he would not be surprised if the economy failed to grow in the
final three months of 2012.
"There has to be some risk that the recent economic stagnation
will continue," Mr. Weale said.
Lloyds Bank chief economist Trevor Williams was equally
pessimistic: "The latest results from our survey reaffirm that
underlying economic growth remains broadly flat. The recent pick-up
in inflation and an unwinding of Olympics-related spending suggest
a somewhat weaker economic performance in the fourth quarter".
Indeed, it is likely that worries about export orders and the
ability of firms to expand into emerging markets, to offset waning
demand from the debt-troubled euro zone, are weighing on growth
expectations.
"The reduction in exports is a particular concern and, whilst
this mostly reflects the turmoil in the euro zone, it also
highlights the scale of the challenge in growing exports to
emerging markets to offset the downturn in much of Europe" said Tom
Lawton, Head of Manufacturing at BDO, who compiled the survey with
the EEF.
The survey also reported that manufacturers' employment plans
slipped right back, with a balance of just +1 expecting to recruit
new staff in the next three months, down from +16 in the previous
survey.
The one bright spot in the survey, however, was the continued
strength of investment intentions. But, given the drop in overall
confidence and ongoing concerns over financing, it remains to be
seen how many of those intentions become reality.
"Investment intentions seem to be defying gravity but the
ongoing issues around access to capital and an unsupportive tax
structure may yet have a serious impact on actual investment," Mr.
Lawton said.
Write to Ilona Billington at ilona.billington@dowjones.com