Don't hold your breath for a manufacturing-based recovery

Rhoda Klapp

More obviousology. Who thought we were going to see more manufacturing? Anyone who is actually involved?

Nobody is buying anything. People who had stocks are living off them. If you have an expert who believed this fairy story of imminent recovery, their judgement is seriously at fault, and I wouldn't trust them to say whaether it was raining outside, they'd turn on the telly sooner than look out of the window.

Hannah

Whoever believed there would be a manufacturing-based recovery anyway?

We don't have the skills any more. Cheap foreign labour has choked off the Brits, lack of apprenticeships and, oh yeah, education, education, education have put paid manufacturing.

RobertD

Beware in the comparisons that you make here. Over the last 15 years companies have made major changes in their supply chain management with just in time and end to end forecasting. The response to a drop in end user demand and the shortage of finance for working capital has been a very rapid cut in output right through the supply chain to both adapt to lower demand and to cut inventories to the bare minimum. With today's systems this can, and has been done, with much greater speed than inventory could be unwound in earlier recessions. Once the system has adjusted it will revert to output being close to actual (admittedly lower) end user demand levels. Provided that there is no further tightening of finance available for working capital the drop in output will not continue at this rate.

Sally Chatterjee

Many British exporters have great products. Yhey don't compete on price alone, it's product quality and service too. So a fall in the exchange rate is not so helpful, especially when demand is drying up around the world.

oldtimer

There is still some way to go to match the 1980s per the Citi chart - but give it time, I expect we will get there.

Just to remind ourselves, the early 1980s witnessed the disappearance of about one quarter of all the UK`s then manufacturing capacity. Much of it was inefficient and shop steward bound. Much probably deserved to go. What emerged was much more efficient.

Today, I suspect that the manufacturing sector is more efficient by global standards. It has had to be to live with the relatively strong pound of recent years. What will go will be, in part, because of excess world capacity. Car plants are at the head of that particular queue, along with their suppliers. Once gone they are unlikely to return.

Doug

Fraser could you do us a favour and link your graphs to larger versions of the blog ones. Some can be quite difficult to read the legends and axis.

I've been highly sceptical of this 'good for manufacturing' meme because the media pundits forget the 'global' bit which is where demand is falling. Doesn't matter how cheap things get people are protecting what cash they have in any way they can.

Chris lancashire

As a real manufacturer who is doing OK in this recession: Our exports are nicely up and nobody except Irish customers (who are more sterling aware) are asking for price reductions.
Secondly, yes we do still have the skills thanks and no we don't want any "help" from government - just get off our backs.
Lastly, the main reason for Fraser's graph is the UK demand but I expect by the autumn things will begin to look different.

Wily Trout

All power to you, Chris Lancashire.

mckenzie

Why are things going to look better in the autumn? People are going to have more money because....?? The Blue Fairy? Fairy God Mother? The economy?

The bottom line is that we are in this mess because we borrowed too much money, and the solution being put forward is to get the credit flowing again? Yeah right. I wonder if this has anything to do with the fact that we do not actually make anything any more, and finance was all we had 'till the weasel went pop.

Can't wait till the autumn guys. It's going to be a fascinating experience to say the least.

mckenzie

Do you believe this crap Fraser, or do you enjoy winding people up?

THOMAS W LYNCH

I seem to recall someone mentioning a "nation of shopkeepers"not that long ago..

Ian C

A cheaper currency is of little use to us if the world is not buying anything anyway - and puts any import costs we need to incur up sharply. So stagnation is the best possible outcome in the short term.

But as RobertD above has said, modern manufacturing units are so much more efficient that a downturn in orders does not immediately lead to a major shake out.

But any capacity loss that occurs if it gets that bad will be shut down & will not return.

But Germany and Japan face a much larger problem in this respect as those economies depend much more upon manufacturing. If we aren't good at something we don't do it. Those with a higher % manufacturing base have their less efficient operators. These will get washed away and probably take some good capacity with them, never to return.

That is Britain's opportunity to pick some of the better manufacturing shaken out from the high surplus manufacturing economies.

TGF UKIP

Yet some manufacturing cutbacks may have been overdone. For instance, Ford dealers are desperately short of new car stock of Fiesta and Focus models in particular.

Could be that manufacturers are emulating the City which never reacts but only ever over-reacts.

Alf Tupper

Chris lancashire.

Would you be in need of any Joiners/Carpenters my very dear friend?

I am available and willing to move anywhere outside a 100 mile radius of London.

hadrian

I seem to recall Broon, Darling and co all airily predicting 'recovery' by the end of this year, or even sooner. Good to have these graphs point up our socialist friends' slight inacuracy.

Malcy

I don't believe it's a clear cut case across the piece.

Sure, overall manufacturing is down. It's also to be expected, given the post-Lehman reaction and general unprecedented credit/confidence crisis, that output has dropped off much more sharply than previous recessions. This is old news.

The much more interesting discussion is what next. Well certainly, as supported by anecdotal evidence and some posters here, some sectors are benefiting from weaker Sterling. But in the main weaker global demand has cancelled out any currency benefit for exporters.

Recovery depends on a variety of factors starting to pull in the right direction, as opposed to the perfect storm downward that we currency have. Some level of confidence needs to return, but I fear the recent reports of an increase in housing enquiries are a false dawn.

Ultimately everything right now is riding on the policy response from major industrialised nations. So far it is not working. Drip feeding failing banks' balance sheets is like watching the slow death of low altitude ski resorts. The answer lies somewhere in ring-fencing the toxic debt in a clearly defined manner. Nationalising bad banks and debt is politically hazardous but it worked for the Swedes and is our only working solution. It makes no sense to effectively damage good banks by subsidising and supporting bad banks. Lets stop this wishy-washy approach and be bold.

Unfortunately the UK is buried in party politics and is in danger of burying itself into a quagmire of 'doing down' and finger pointing.

As a nation we must move on to the solutions. We must debate them urgently. We can discuss obscene bonuses another time, those debates are distracting us from the real issue. The real debate is what policies can lift the UK and improve its' position relative to its' trading partners.

To do that we must find consensus. And we must do it fast.

PS. Inflation, or even hyper-inflation, is the next major concern.

Dave B

For the sake of comparison, the following quote is taken from The Telegraph:

"Spain's agony is already well advanced. Industrial output has fallen 24pc. "

"As it is we have seen industrial production collapse in every region. The drops in January were: Japan (-31pc), Korea (-26pc), Russia (-16pc), Brazil (-15pc), Italy (-14pc), Germany (-12pc). Falls that took two years from late 1929 have been compressed into five months."

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/4958395/Thanks-to-the-Bank-its-a-crisis-in-the-eurozone-its-a-total-catastrophe.html

Chris

The collapsing currency plan, hailed as genius by all sides in British politics, does not work. It's never worked. It's a really stupid idea.

So that's the only argument against the euro destroyed.