UK manufacturing suffers slump in demand, says EEF

UK manufacturing is encountering a poor end to the year amid "gathering gloom" from the global economy, according to industry body the EEF.

It has cut its manufacturing forecasts, expecting a 0.1% fall in 2015, with 0.8% growth next year.

Its survey also points to serious concerns about the outlook for the global economy.

Meanwhile, a report from Lloyds Bank shows car manufacturers have also lowered their growth forecasts.

The EEF says that weakening demand from developed and emerging markets have become more prominent, leading to falling exports.

Steel job losses

As well as exports, the EEF says job prospects have been hit, particularly with more spare capacity in the oil industry, which has been hit by falling prices.

Meanwhile, recent job losses in steel companies have also hit the sector.

The EEF report follows last week's Markit Purchasing Managers' Index (PMI), which showed UK manufacturing slowing in October.

Manufacturing accounts for about 10% of the output of the UK economy.

The production industries: mining, quarrying, gas, electricity, water and sewage account for another 5%, and construction makes up 6%.

'Downbeat mood'

EEF chief economist Lee Hopley told the BBC that the findings were a "disappointing end to the year".

She said the collapse in the oil price, slower world trade growth and weaker-than-expected construction activity had all contributed to weaker manufacturing activity.

She added that the chancellor's recent Spending Review had some "positive" policies for industry, but it was important the government continued to act to ensure the UK was a competitive location for manufacturing.

Volatile

In the last decade, manufacturing grew gradually from 2005 to 2008, at which point it took a dive in the financial crisis, in common with the rest of the economy.

It recovered from 2010 until the start of 2012 and its growth has been volatile since then.

The sector is still below its pre-crisis peaks, unlike the service sector, which is well above its pre-crisis level.

'Economic rollercoaster'

Meanwhile, carmakers have also revised down their growth forecasts for the next two years to 14%, down from 18% last year, according to a Lloyds Bank survey.

The bank found 43% of automotive firms believed the global economy was the prevailing challenge for the industry.

David Atkinson, head of SME manufacturing at Lloyds Bank, told the BBC's Today Programme: "The worldwide economic rollercoaster is forcing them to scale back their growth plans."