U.K. Factory Slump is Easing, Recovery Not ‘Strong,’ EEF Says

By Svenja O’Donnell

Sept. 7 (Bloomberg) -- U.K. factories’ output will decline at the slowest pace in more than a year in the next three months as the economy recovers from recession, a survey of manufacturers showed.

An index of manufacturing output is forecast to rise to minus 2 in the next three months, compared with minus 25 in the third quarter, a survey by the Engineering Employers Federation and BDO Stoy Hayward LLP showed.

“Things seem to have stabilized in the past three months but I don’t think there’s anything to suggest a strong recovery,” Steve Radley, the EEF’s chief economist, told reporters in London. “There isn’t a feeling of confidence coming back.”

Britain is showing signs of emerging from the worst recession in a generation after the Bank of England last month voted to buy an additional 75 billion pounds ($123 billion) of bonds with newly created money. The recovery in manufacturing is expected to lag the rest of the economy, the EEF said.

BDO Stoy Hayward also published a report based on business surveys showing that the central bank will probably keep the benchmark interest rate at 0.5 percent until the fourth quarter of next year. The survey covered 11,000 respondents from companies employing approximately five million employees, BDO Stoy Hayward said.

The economy will probably grow 0.6 percent next year, with manufacturing forecast to expand 0.5 percent, the EEF said.

Unemployment is still forecast to increase, with the number of jobs cut in manufacturing companies estimated to total 359,000 for the period from 2008 through 2010, the report showed.

The next interest-rate decision is Sept. 10.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.