Manufacturers fear UK economy is facing downturn

Manufacturers are pessimistic for the first time in two years following a slump in expectations of consumer spending and business investment in the UK and abroad. A survey by the CBI found that a growing number of companies in the industrial sector are gloomy about the next year and plan to restrict investment and cut jobs. The CBI said that not since the depths of the recession in 2009 had manufacturers adopted such a downbeat outlook, with expectations of slower activity "driving a reappraisal of forward-looking business plans". The Industrial Trends quarterly survey found that growth in total orders and production eased slightly in the three months to July, with a further deceleration expected over the next quarter. "As a result, after a fourth successive increase in employment in this survey, they plan to cut headcount over the next three months and have revised down their investment plans for the year ahead," the business trade body said. Manufacturers reported they were less optimistic than three months ago after a fall from +9% to -16% in the CBI index, the first fall in sentiment since July 2009. The survey is an important indicator of sentiment and in the past has supported the Treasury's view that the private sector can grow despite tax rises and cuts in public spending. In April last year manufacturers were at their most confident and indicated they would be seeking to employ many more people. A slump in confidence in the latest survey will be seized upon by government critics, who believe it was always optimistic to expect the industrial sector to pick up the slack in the rest of the economy and almost single-handedly reduce unemployment. The CBI survey fits with reports from other sectors that have reported a slump in confidence. Analysts are predicting that the Treasury will be forced to cut its growth estimate for the UK after gross domestic production data on Tuesday showed that activity increased by just 0.2% in the second quarter of 2011, after flatlining in the previous six months.