LONDON (AFX) - The recovery in UK manufacturing continued to make slow progress last quarter, with exporters remaining under pressure from the strength of sterling and intense competition, according the latest quarterly survey from the British Chambers of Commerce.
The survey, covering 7,528 companies, showed that manufacturing home sales rose by 15 pct, which compares to the quarterly increase of 12 pct in the third quarter 2000.
Manufacturing orders rose 12 pct in the fourth quarter from 11 pct in the previous quarter, driven by the improved performance of micro and small-sized firms.
Manufacturing export sales, however, remained virtually flat at six pct, while orders slumped seven points to zero growth in the last quarter, BCC said.
The survey also showed a rebound in service sector UK sales to 35 pct in the fourth quarter from 30 pct in the third quarter, as well as an increase in orders to 31 pct in the fourth quarter from 23 pct in the third quarter.
However, indictors remain below the peaks recorded in 1996/1997.
Looking forward, Ian Fletcher, BCC's chief economist said, "The recent fall in the trade weighted value of sterling should offer some relief to hard-pressed manufacturers, but intense competition will make it difficult for them to restore margins."
"Manufacturing is particularly at risk from a slowdown in U.S. growth and preemptive action is needed from the Bank (of England) to help bolster confidence and investment in the sector."
53 pct of manufacturing firms reported exchange rates as their main concern. Worries about competitive pressures in the service sector also increased by seven points to 40 pct of firms in the last quarter.
The balance of service sector firms intending to raise prices has increased to 32 pct from 23 pct, but pressure from pay settlements remains below recent peaks and there are signs that the labour market has stopped tightening.
BCC further noted that pressure on manufacturers' prices from rising raw material costs stabilised in the last quarter, but pay settlements are a growing concern in this sector.