EEF slashes growth forecasts as confidence falters

Confidence among UK manufacturers is fading after the engineering and manufacturing sectors suffered their weakest performance for two years in the second quarter of this year. The latest engineering outlook survey, published by the manufacturers` organisation EEF and RSM Robson Rhodes, reveals that the UK order balance is at its weakest point since the first quarter of 2003, and that only a quarter of the 1,089 companies surveyed plan to increase capital investment.

As a result of the survey, EEF has slashed its growth forecasts for engineering (down to 1.1% from 2.6%) and manufacturing (down to 0.5% from 1.4%).

"Manufacturers could only escape the double impact of a reluctant consumer and a poor Eurozone for so long, and we are now beginning to see the effects," comments EEF chief economist, Steve Radley. "Despite a positive picture in some industries, there has been a change in sentiment across the economy, which will need addressing if growth begins to stutter."

The sectors which remain positive include mechanical equipment, electronics, electrical equipment and basic metals. However, motor vehicles reported a sharp decline, possibly reflecting events at MG Rover.

• Figures from the Office for National Statistics reveal that manufacturing output increased unexpectedly by 0.9% between March and April, following a 1% drop the previous month. In the three months to April, output was 1.4% lower than during the previous quarter.