Manufacturing in the UK is slowing as the world economic outlook becomes more uncertain, a survey from trade association EEF and consultants BDO.
Much of the softening in demand came due to a domestic slowdown, the report said, and exports continue to grow. Companies expect their order books to decline even further into the next three months, with both home and export markets set to weaken, the survey found.
EEF and BDO have downgraded their expectations for the sector's growth to below 1% for 2012.
Lee Hopley, EEF's chief economist, said that while output was still positive, confidence in the short term has "all but fallen away."
"The signs of caution that had been emerging through the second half of this year have clearly become more entrenched as global growth concerns have escalated. There are not only question marks over wider manufacturing prospects at the beginning of 2012, but also the exports and investment needed to underpin sustainable growth,” Hopley said.
Some sectors, including motor vehicles and mechanical equipment, have outperformed, and should continue to do so if strong demand from the civil aviation industry continues, the report said. However, the basic metals, rubber and plastics and electronics industries showed negative output and negative balance of orders.
Recruitment was relatively strong, with a balance of 18% of companies hiring new staff in the last quarter, and companies continued to invest. However, the report warned, cashflow squeezes mean that this may not be sustained.
"Although exports have maintained a relatively strong performance in the quarter the continuing problems within Europe, which is by far our biggest export market, are clearly having an effect and generally increasing a feeling of nervousness and lack of confidence," Tom Lawton, head of manufacturing at BDO, said.
"However, despite this gloom manufacturing looks set to perform well in relation to other parts of the UK economy in 2012 and we would strongly encourage the government to increase the momentum of support for the sector in order to help rebalance and boost the economy. It seems clear that manufacturing has to be at the centre of the government’s future growth plans.”