Amidst the rapidly worsening global downturn, and despite the raft of government measures announced on November 24, the indications are that the UK won’t recover from the crisis before 2010 – and will face six years of austerity to pay for the cost of the recession.
The latest snapshot of business prospects for the timber and wood products industry, provided by the CBI’s Industrial Trends Survey and covering a three-month horizon, reveals that a sharp decline in expected demand, coupled with falling output, has led to a plummet in business confidence.
In the next three months 16% of firms expect new orders to rise, while 37% expect them to decline. The resulting balance of -21% compares with -23% expecting a decline at the time of the previous quarterly poll in July. Output of timber and wood products is set to drop over the coming quarter, according to 24% of survey respondents, although this is slightly less gloomy than the earlier survey.
Some 80% of firms are now less optimistic than three months ago, compared with 65% in the previous poll. Uncertainty about future demand is the most important reason for firms’ planned cut in capital spending over the next 12 months, with 73% citing this as a factor. The balance of firms intending to reduce capital spending is broadly unchanged from the previous survey, at around 40%.
A similar survey by the CBI of furniture manufacturers found 97% with lower business optimism than three months before, reflecting a massive 87% expecting lower demand and 65% predicting reduced output.
Official figures on retail furniture sales volumes suggest that business picked up during October, but remains nearly 6% lower than a year ago and is down just under 1% by value. However, the British Retail Consortium describes official figures as more optimistic than its own survey indicates.
Worries about jobs – the CBI forecasts more than three million unemployed by 2010 – are among the pressures driving down consumer confidence and tempering views on making big purchases such as furniture. The October GfK NOP major-purchase index dropped 11 points – to the lowest since records of this measure began in 1982, and 38 points lower than 12 months ago. The CBI expects lack of consumer confidence to reduce household spending by 1.8% next year.
In construction, the CIPS-Markit poll of purchasing managers indicates that housing remained the worst-performing sector, but with activity on commercial projects falling at a record pace.
Officials estimate that total new construction orders placed in the three months to September fell by 11% compared with the previous quarter and by 19% annually, while private housing orders dropped by 33% on the quarter and by 53% annually. But the Council of Mortgage Lenders says borrowing rose by 7% in October, although they were down 44% on a year earlier.
In the wider picture, November brought news that the 15-nation eurozone is now officially in recession, after Germany, the engine of European growth, moved into recession in the third quarter.
The rapid speed of global economic decline prompted warnings from the Bank of England that UK growth could fall by 2% over the next year, with the possibility of retail price deflation in 2010. Some City analysts believe that even this downgraded forecast is only a foretaste of worse to come, but others admit to the impossibility of making sound predictions in the present economic climate.
