Machine tools sector slipping

Year-on-year demand for machine tools in the UK is forecast to fall by 5% in 2008, by 14% next year and a further 10% in 2010. By historical standards, this represents a relatively modest downturn, the MTA says and in making the forecast has identified positive factors such as lower interest rates, the weak pound (many machine tool purchasers in the UK are exporters who will benefit from the weak currency) and the fact that order books are reasonably strong. Against this, the MTA points to the weakening economy in the UK and in some key export countries, the sharp downturn in the motor vehicle sector and financing problems for smaller companies in particular. The results of the MTA’s Quarterly Trends Survey for the third quarter of 2008 support the view that the downturn began during the summer, with a sharp downturn in confidence coupled with a significant decline in orders. The key points of the survey, which had 101 respondents from across the Association, were: · Order intake was 6.1% lower than in the second quarter of 2008. · The percentage balance for business confidence in the third quarter of 2008 fell to minus 81%, with suppliers of machinery reporting their most negative outlook since 1983 · Expectations about business in the fourth quarter of 2008 are for a further 3.8% reduction in order intake. MTA statistician, Geoff Noon (pictured) said the results reflected the impact of the wider economy on the machine tools sector over the past few months. He went on: “Until the middle of the year however, order books were still growing, so our outlook for demand, which is based on deliveries of machines rather than order intake, should hold-up into the New Year. After that, it seems inevitable that there will be a downturn in machine tool demand in the UK, but various factors do point to this only being a moderate recession for the manufacturing technology sector. The only problem with this forecast is that previous history suggests that we don’t do modest recessions, so the risks would seem to be concentrated on the downside”.