Manufacturing Growth Eases

12 Nov 2007

News posted by Shannon Dumper

Credit crunch is having an effect on UK industry, says new figures, as engineering employers call on the government to ease the impact of capital gains tax on smaller firms.

Growth in Britain's manufacturing sector eased markedly in September to a 10-month low as slowing growth in the US and Europe and tighter lending weighed on output and new orders.

The Chartered Institute of Purchasing and Supply's purchasing managers' index showed manufacturing activity dipped to 52.9, from 54.7 in September and down from August's three-year high of 56, to register its lowest reading so far this year. The City had forecast a slight fall to 54.4.

However, the index remained above the long-run average of 51.6 and the 50 mark which separates expansion in the sector from contraction.

The poor figures signalled that the credit crunch is forcing firms to clamp down on their spending and suggests that the shortage in the availability of credit, which was triggered in August by defaults on US mortgage debt, may hit growth going forward.

Meanwhile, engineering employers' body EEF has urged the Chancellor to introduce two separate tax rates for business and non-business assets to try to limit the impact on smaller firms of the proposed reform of capital gains tax.

The EEF told Alistair Darling that the proposed changes to capital gains tax sent a negative signal at a time when the investment climate, especially for small firms, was set to become more difficult.