UK chem firms remain pessimistic on recovery prospects

26 April 2004 15:10  [Source: ICIS news]

LONDON (CNI)--UK chemicals manufacturers remain largely pessimistic over the prospects for a recovery this year, according to the latest Confederation of British Industries (CBI) monthly industrial trends survey published on Monday.

 

The survey, carried out in late March and early April, found that 41% of chemical company respondents had seen production fall over the past three months and exactly the same number expected it to fall again in the next quarter. Just under 40% believed output would be unchanged in the next quarter while only 20% expected it to rise.

 

More than half (53%) of chemical companies said their order books were below par, with only 9% reporting higher than normal orders. However, export orders gave a slightly more upbeat picture, with 56% of firms describing their export order book as normal, 20% as better than normal and only 24% below normal.

 

Sixty per cent of companies were holding more stocks of finished goods than they needed, and 51% expected to have to reduce staffing in the next three months. The job prospects contrasts sharply with the past three months when 73% of respondents said they had seen no change in employment numbers and only 24% said they had come down. 

 

Just over 50% of chemicals respondents said they had been obliged to cut domestic prices in the last three months, and 49% expected further falls in the coming quarter. But export prices were much more stable, with around half of the respondents forecasting no change.

 

When asked about overall optimism on the general business situation in the UK chemicals industry, 43% said their views were the same as three months ago. Forty-two percent said they were less optimistic and only 15% more optimistic.

 

The figures show the chemical sector as much weaker than overall manufacturing industry, where as many as 38% of firms said their orders were up and forward bookings have reached a nine-year high. 

 

The CBI’s interpretation is that a manufacturing recovery is gathering momentum but the strength of the pound against the dollar is holding back overseas sales. Its chief economic adviser Ian McCafferty commented: "The indications in this survey that the manufacturing recovery is taking hold are good news but the initial signs that the strengthening pound has affected exports are a concern.”

 

He added that businesses recognised that interest rates would have to go up over the next year.

 

The CBI received 761 responses to its survey of manufacturers, which was carried out between 25 March and 14 April. 

By: Peter Mitchell
+44 20 8652 3214

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