British firms lack confidence and let workers go despite positive indicators

BUSINESS confidence is continuing to decline among the captains of industry in Britain.

Gloomy findings of the Confederation of British Industry's latest Quarterly Industrial Trends survey show confidence in manufacturing industry has fallen for the fourth survey in a row. New orders and output have failed pick up in recent months and firms are experiencing a standstill in export markets.

Firms are more pessimistic about export prospects than at any time since October 1993. Manufacturers have responded to the weakening prospects by shedding more employees than at any time over the past two years and further job cuts are expected.

The CBI's findings raise questions about the durability of the economic pick up in recent months and the return of the "feel good" factor among disaffected Tory voters in time to rescue John Major's administration from humiliating defeat in the general election.

Although economic and monetary indicators suggest the economy is beginning to move ahead again after a period of weakness in the second half of last year, the CBI's survey confirms the pick up has not extended to the manufacturing sector.

Mr Andrew Buxton, chairman of the CBI's Economic Affairs Committee, said a period of "static manufacturing activity" was being experienced, and there was notably flat orders in export markets which have been the backbone of recovery over the past two years.

While firms do not expect activity to remain flat for long, Mr Buxton cautioned that previous surveys had shown that expectations of recovery in manufacturing demand and output could be disappointed.

"Despite the standstill in manufacturing, the economy as a whole is performing better with recent CBI surveys into retailing and the financial services sector producing more positive results," said Mr Buxton. "We are also seeing sharper job cuts in manufacturing and an easing of price and capacity pressures.

But the outlook for output price inflation is more promising as price expectations are subdued. "The picture for unit costs is also positive with no change expected over the next four months." The CBI survey reported that the percentage of firms working below capacity has grown to 52 per cent, the highest level since July 1994, and fewer firms are citing plant capacity as a factor likely to limit, output over the next four months.