Manufacturing has been one of the stronger sectors of the UK economy in recent months
Confidence among UK manufacturing firms has fallen to its lowest level in two years, a survey suggests.
The Business Trends optimism index from the accountants BDO fell to 90.1 last month, from 97.5 in May, and way down from 116.4 in February.
BDO said the drop could be attributed to slackening demand domestically as well as the global economic slowdown.
It also pointed out business sentiment in the eurozone has been hit by the ongoing sovereign debt crisis.
BDO said such a large slump in business confidence in the manufacturing sector was of real concern, given that the sector has provided the propulsion for the economic recovery so far.
"To reinvigorate the sector and the economy more widely, we need a three-pronged approach," said Peter Hemington, partner at BDO LLP.
'Sluggish'
"First, we urge the government to implement supply-side reforms - particularly reform of the tax system, measures to encourage private sector investment in infrastructure and introducing more flexible employment laws to facilitate businesses' ability to react swiftly to volatile conditions," he said.
"Second, although inflation remains high, low interest rates are essential to maintain momentum for growth, by driving spending at a time when consumers are feeling the pinch.
"Third, as recovery prospects over 2011 seem sluggish at best, the Bank of England should continue to consider a third round of quantitative easing to provide some much needed impetus for growth."
BDO's output index also fell in June, while the wider business optimism index - which includes other sectors as as well as manufacturing - also dipped.
BDO's surveys are compiled by the Centre for Economics and Business Research and covers 11,000 companies from a range of industries.
Post a Comment