LONDON (AFP) - Britain's manufacturing recovery stuttered in the third quarter, weighed down by a slowdown in demand and the surging cost of raw materials, the country's leading business grouping said.
Manufacturers' orders and output growth was sluggish during the last three months, according to a quarterly industrial trends survey by the Confederation of British Industry (CBI).
"Although orders and output have risen, the rate of increase is slow," said the CBI's chief economic adviser, Ian McCafferty.
"Manufacturers are cutting back on investment and jobs as they become less confident in the pace of recovery. Oil and commodity prices are damaging profitability and we expect this pressure on margins to be maintained," he added.
A total 31 percent of manufacturers reported higher orders in the last quarter while 27 percent reported a fall, the CBI survey showed.
The balance of plus-4.0 percent compared with plus-2.0 percent in the previous quarter and plus-18.0 percent during the first three months of the year.
Meanwhile output rose for the fourth successive quarter but growth was at its slowest rate in 2004.
The CBI survey found that 28 percent of manufacturers reported higher output in the third quarter while 22 percent cited a fall, a balance of plus-6.0 percent. This compares with a balance of plus-7.0 percent in the quarter to July and plus-15.0 percent in the three months to April.
The CBI said that while production was expected to hold up in the next quarter, new orders were set to grow at a much slower pace.
"With expectations of weak growth in demand, manufacturers plan to scale back investment and reduce headcount," the CBI said.
The grouping noted the adverse impact of soaring commodity prices.
"Raw material cost increases have been significant," it said.
"In the last three months, oil prices rose by 32 percent and metals prices by 16 percent. Oil prices are up 75 percent and metal prices up 55 percent since October 2003."
New York's main contract, light sweet crude for delivery in December, hit an all-time high of 55.67 dollars a barrel on Monday on fears of major disruption in Norway, the world's third-biggest oil exporter.
British manufacturers are struggling to recover from several tough years due to a strong pound, a global economic slowdown and stiff competition from low-cost producers such as China.
The industry recently welcomed the Bank of England's decision to sit tight over interest rates. British borrowing costs stand at 4.75 percent after five quarter-point hikes since November.
"We urge the Bank of England to keep interest rates on hold for the foreseeable future," McCafferty said.
A total 770 manufacturers responded to the CBI survey, carried out between September 23 and October 13.
10/26/2004 - 13:57 GMT - AFP