U.K. Factory Slump to End in 2010 as Exports Rebound, EEF Says

By Jennifer Ryan

Dec. 7 (Bloomberg) -- U.K. factory production will begin growing again next year as exports rebound, said the Engineering Employers Federation.

Production will grow 0.9 percent in 2010 after contracting 10.4 percent this year, the London-based lobby group said today. A measure of expected export orders rose to six points, the first positive reading since the third quarter of 2008, according to a survey by EEF and BDO Stoy Hayward LLP.

The report adds to signals the U.K. is emerging from the longest recession on record after the British Chambers of Commerce said yesterday the recovery has started. The Bank of England will probably maintain its bond purchase plan at 200 billion pounds ($331 billion) this week as it assesses the strength of signs of a rebound.

“We’re clearly through the worst effects of the global economic downturn,” said Lee Hopley, chief economist at the EEF. “The recovery is in sight, but it’s not expected to be quick or easy. Companies are quite cautious.”

A measure of manufacturing output shows rose to minus 3 from minus 25 in the third quarter. The group polled 618 companies from Nov. 4 to Nov. 25.

The bank will decide to keep unchanged its bond program, according to all 52 economists in a Bloomberg News survey. All 50 economists in a separate poll said policy makers will hold their key interest rate at 0.5 percent. The bank announces its decision at noon in London on Dec. 10.

Pre-Budget Report

The bank’s decision will come a day after Chancellor of the Exchequer Alistair Darling presents his pre-budget report to Parliament, where he will update tax and spending plans.

“Businesses and markets need a clear signal on where the balances of tax rises and spending cuts are going to come from, when the fiscal tightening is going to start,” Hopley said. “The job of the PBR is a clear steer on some of the details. What business needs is that certainty, and now is the time to start providing some of that detail.”

The BCC said yesterday Britain’s gross domestic product will decline 4.6 percent this year, compared with a September estimate of a 4.3 percent drop, the London-based lobby group said in an e-mailed statement. In 2010, the economy, which returned to growth this quarter, will expand 1 percent, compared with a previous forecast of 1.1 percent.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net