Industry's costs leap as orders fall

ONLY days after the final collapse of carmaker MG Rover, the CBI's latest Industrial Trends survey has underlined the depth of the crisis in UK manufacturing.

A sharp fall in orders since the start of the year made the first three months of 2005 the weakest quarterly performance since July 2003, according to the survey of 676 manufacturers.

The biggest source of pain was the soaring cost of raw materials, especially oil. Although costs and prices grew at the fastest rate since July 1995, cost increases 'clearly' outstripped price rises, the CBI said.

'Falling orders and output, and rising costs and prices have led to the third successive [quarterly] deterioration in confidence,' it added. CBI director-general Sir Digby Jones warned that 'any post-election tax raid on business would hit a manufacturing sector already in a fragile position'.

A similar message came from British Chambers of Commerce director-general David Frost, who said reversing the decline in manufacturing would be a priority for the new Government. He called for a 'national enterprise strategy' to stimulate enterprise across the country.

Cost pressures intensified in all major sectors, as high oil prices helped push up costs at the fastest rate for nearly 10 years while hitting demand for manufactured goods in overseas markets. Export orders declined at the fastest rate in 18 months.