LONDON: The economic downturn in China has compounded pressures on UK manufacturers and hit their output and exports, a leading business group will warn on Monday as it slashes its outlook for the sector.
Sales to the domestic consumer market and booming car production have not been enough to make up for a drop in overseas demand, says the manufacturers’ organisation EEF. Those manufacturers making mechanical equipment have been particularly hard hit as waning orders from China coincide with flagging demand from the oil and gas sector, itself hit by a plunging oil price.
The trade group is halving its growth forecast for manufacturing this year to 0.7% from 1.5%, citing a “rollercoaster of risks” that include renewed eurozone tensions and a slowdown in emerging markets, particularly China.
EEF chief economist Lee Hopley said that while the overall UK economy looked set for “solid” growth this year, manufacturers were contending with a lower oil price, fragile eurozone growth, and now the blow to global investor confidence from turmoil in China.
“While UK data has continued to point to solid growth, UK manufacturing is having to contend with a rollercoaster of risks from the rest of the world and the white-knuckle ride is starting to take its toll,” she said.
We’ve seen the future of the eurozone on the line once again, turbulence and uncertainty over China and Greece and, of course, oil and gas are still a concern. Against this backdrop, it’s no surprise that confidence is faltering and UK manufacturers are feeling less optimistic about their growth prospects for next year.”
The gloomier outlook for manufacturing this year reflects signs of falling production and orders in EEF’s latest survey of businesses, as well as a string of other weak indicators in the sector, including official figures showing it contracted in the second quarter.
For the first time in more than two years, there were more companies reporting a drop in output than a rise, according to the EEF survey, published with law firm DLA Piper.
