Manufacturing sector will cut more jobs, says CBI

Manufacturing sector will cut more jobs, says CBI

	Published : Wed, 25 Jan 2006 16:05 By : Richard Owen Print this Story

LONDON: The Confederation of British Industry has warned that manufacturers will be forced to cut more jobs in the coming months as costs continued to rise and profit margins dwindled. In its latest quarterly survey, the CBI said the gap between price increases and cost increases had widened to a near record level.

The survey showed 4 per cent of firms cut prices over the latest quarter while 23 per cent suffered a rise in costs. The gap of 27 percentage points was significantly above the average of 12 points and just short of the record 28 points recorded in the October survey.

The CBI said orders fell for many firms, while the number of firms working below full capacity reached a two-year high over the three months ending January. There was also a slowdown in the rate of decline in new orders, output and optimism for the months ahead. The survey revealed that the monthly manufacturing order books balance was -28 in January after -22 in December.

Manufacturers cut an estimated 25,000 jobs in the last quarter, taking the total cut for the year to 106,000, said the CBI. It predicted that things are going to worsen on the job front as a balance of 18 per cent of manufacturers are expected to cut jobs over the next four months. Manufacturing accounts for 3.3 million jobs in Britain - a record low.

CBI's chief economic adviser Ian McCafferty said conditions for manufacturers are becoming increasingly tough as costs continue to rise and weakening demand reduces the prices, affecting the profit margins. He said the increasing oil and gas prices have driven energy and raw material costs for the manufactures, who are then forced to cut down on staff to contain the wage bills.

Analysts now say the monetary policy committee of the Bank of England has been over-optimistic about the country's growth prospects and it will have to cut rates this year.

The CBI survey had one positive signal -- the balance of those reporting better export orders in January improved to -10 per cent from -23 per cent in December, the biggest rise since August 2004.