The Engineering Employers’ Federation (EEF) has urged the Chancellor of the Exchequer to bring forward measures in his pre-budget statement to protect the UK economy, and manufacturing in particular, where an already deteriorating situation has been exacerbated by the attack in the United States.

The call comes as the monetary policy committee again review interest rates following a cut in the US rates.

EEF Director-General, Martin Temple, said, “We have not made this call lightly and we are not talking the situation down. The figures speak for themselves. We cannot overstate the severity of the situation facing our sector, where an already deteriorating situation has been exacerbated by the awful events in the United States.

In addition to a further immediate cut in interest rates, there is now an urgent need for the Chancellor to bring forward measures in hig pre-budget statement such as an immediate reduction in employers national insurance contributions.

He should also commit to an immediate review of the Climate Change Levy and remove the uncertainty surrounding the Minimum Funding Requirement. These measures, taken together, would help to alleviate the situation facing many companies and prevent any further job losses.”

The call comes on the back of the EEF/RSM Robson Rhodes third quarter engineering outlook survey, taken before 11 September, showing that the sector is suffering worse conditions than in the course of the last recession from 1990-92.

In addition, further evidence from a straw-poll survey conducted after 11 September indicates that, given lead times in orders and sales, manufacturers have yet to feel the effect of the terrorist crisis. However, anecdotal evidence suggests a growing mood of uncertainty.

In the first half of this year, engineering output contracted by 9% according to official statistics. However, with conditions clearly having worsened, and the survey’s forward looking indicators now negative, it is almost certain that the 10% contraction seen in the whole of the last recession will be exceeded in this year alone.

Key findings:

• Engineering now forecast to contract this year by 2.5%, with growth set to recover by only 0.3% in 2002
  Output, total new orders and export orders all worsened significantly
  
• Capital investment the worst for three years
  
• Employment has plummeted in the last six months with job losses in manufacturing this year expected to fall by 150,000. A further 164,000 are forecast to be lost in 2002
  Electronics and electrical equipment, motor vehicles and metals have suffered the worst falls in output
  Scotland, East Anglia and the East and West Midlands suffered the worst
  
• The slowdown in the global economy, which began around the middle of 2000, has gathered momentum in recent months and its effects have become more widespread.

Although it is still too early to quantify the effects of the attack, the uncertainty dominating the global economy has had an impact on consumer confidence, suggesting a further difficult period ahead. As a result, only a modest recovery in global trade during 2002 looks likely.

By sector, the worst performers have been electronics and electrical equipment, down more than 18% since the start of the year, motor vehicles (3%) which has now been declining for over 18 months and basic metals (2%). In addition, of particular concern is the immediacy of the problems being announced by the aerospace sector which traditionally has long lead times.

The regional picture has been just as marked with widespread falls in output and orders across all regions. The largest contractions were in the East of England and East Midlands (possibly through the effects on agricultural equipment from foot and mouth) and Scotland, which continues to suffer from its dependence on electronics. The West Midlands with its heavy dependence on the automotive sector has now suffered five quarters of declining output.