Lack of capital investment risks holding back manufacturing recovery
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Manufacturing's recovery is at risk because of a marked and increasing lack of investment in plant and machinery, the manufacturers' organisation EEF said today (28 August) as official figures recorded a steep decline in business investment across most industries.
Business investment for the second quarter of 2009 is estimated to be 10.4 per cent lower than the previous quarter and 18.4 per cent lower than the same period last year.
Declines in business investment were greatest in manufacturing – down 16.8%, with the fall in capital spending being attributed to industries within food, drink and tobacco (down 20.8%), engineering and vehicles (down 24.2%) and textiles, clothing, leather and footwear (down 25%).
Commenting on the data, EEF economist Lee Hopley said: "Manufacturing investment has been a casualty of the global recession as both cashflow and confidence have been hit hard. Such a rapid and significant pull back in investment in modern machinery and equipment presents risks for a durable recovery, especially as investment intentions can be slow to recover following a downturn. Support from government, in the form of a temporary increase in capital allowances has been put in place, but the falls in investment this year make a case for extending this extension at the Pre-Budget imperative."
