THE Engineering Employers Federation (EEF), the body that represents the manufacturing industry in Britain, has produced its latest forecast which spells out how the country’s manufacturing sector is in complete meltdown in the face of the ‘gathering gloom’ for the world capitalist economy.
According to the EEF, the cause of the crisis is weakening demand from developed and emerging markets leading to falling exports. In a poke in the eye to Osborne and Cameron, who constantly spin the lie about a jobs recovery and falling unemployment rates, the EEF cite the job crisis in the oil industry, where North Sea oil has been decimated by the crash in world oil prices along with other major job losses, including the thousands being laid off following the collapse of the steel industry.
Manufacturing accounts for about 10% of the output of the UK economy. The production industries: mining, quarrying, gas, electricity, water and sewage account for 5%, and construction 6%. This is the ‘real economy’ which economists talk about. The other 80% of the British economy is reliant on the service and financial sectors.
Output across these sectors of industrial manufacturing has fallen to its lowest levels since 2009 following the international banking collapse. The gloom was expressed by Lee Hopley, chief economist at EEF, who said: ‘The prospect of manufacturing contributing to growth in the UK economy this year has all but faded away.’
This latest dose of economic reality will pose further agonies for the Bank of England which is eager to follow the lead of the US Fed and raise interest rates. Any increase in the interest rate will lead not only to even more bankruptcies as industries that are heavily indebted to the banks find interest repayment impossible to sustain but will also kill off any ‘export led recovery’.
A hike in the rates will inevitably drive the price of the pound up as all the speculators pile into sterling seeking to benefit from any increase and so push up the price of exports. The whole issue of free or cheap money, generated through printing trillions of pounds, dollars and euros through Quantitative Easing and near zero interest rates, leading to a debt time bomb, is causing panic amongst the world leading financial watchdog.
The Bank for International Settlements (BIS), the central banks’ central banker, yesterday issued yet another of its regular doom-laden forecasts when it warned that the ‘uneasy calm’ in the money markets masked a debt time bomb that could explode at any minute.
Data produced by BIS showed that the world’s debt held in dollars had rocketed to £6.5 trillion ($9.8tn) in the second quarter of 2015, while in the so-called emerging markets the debt held by borrowers in dollars had doubled since 2009 to more than $3 trillion.
Even a small increase in the cost of servicing debts held in dollars will plunge these ‘emerging markets’ into a gigantic world crash – something the IMF warned about in October when it forecast a ‘looming credit crunch’ in these markets. Such a credit crunch, in reality the drowning of whole countries under a mountain of debt, will not be confined to emerging markets.
It will sweep the world capitalist system creating a revolutionary crisis of historic proportions as the capitalist class try to save themselves by dumping the crash on the backs of workers. This was made clear by the Tories who responded to the EEF saying: ‘The difficult conditions in the global economy affecting manufacturers and others makes it more important than ever that we stick to our long-term economic plan for sustainable growth.’
The long-term plan the Tories have is to stop all spending on things that capitalism can no longer afford including welfare, the NHS, local government and every benefit that workers and young people are entitled to. The working class will not sit back and passively allow their lives to be smashed up to save this rotten decaying system.
They are already reaching the conclusion that the only solution for the working class to this historic crisis of capitalism is to put an end to the system itself through the victory of the socialist revolution.