UK bosses yesterday warned that the deepening UK slump will see unemployment soar further to 2.9 million next year.
The manufacturing sector turned in its worst performance for three years in May, according the latest Markit/CIPS survey. Its manufacturing Purchasing Managers’ Index dropped to 45.9 in May, down from 50.2 in April. A reading below 50 indicates contraction and slump. The report noted that manufacturers had cut back on both output, employment, purchasing and inventories.
The manufacturing survey followed the British Chambers of Commerce’s (BCC) revision of its UK 2012 growth forecast down from a minuscule 0.6 per cent to an almost non-existent 0.1 per cent. Even this is being taken as too optimistic.
The data, in the BCC’s latest Quarterly Economic Forecast, follow official ONS figures showing that the UK has returned to slump. The BCC survey said: ‘We predict that UK unemployment will increase from 2.625 million (8.2 per cent of the workforce) in Q1 2012, to 2.9 million (nine per cent of the workforce) in Q3 2013, a net increase of 275,000 in the jobless total.
‘This is in part down to public sector spending cuts, many of which are yet to be implemented. In addition, falls in UK productivity seen since 2008 will be partially reversed in the next few years, and if demand in domestic and export markets remains weak, this will add to the jobless total.
‘Youth unemployment will total 1.07m in Q3 2013. Unemployment in the 16-17 age group is forecast to total around 223,000 (a jobless rate of 41 per cent) in Q3 2013. Unemployment in the 18-24 age group is forecast to total around 850,000 (a jobless rate of 23 per cent) in Q3 2013.
‘Our public sector borrowing forecast for 2012/13 is £98bn, some £6bn above the latest OBR (Office for Budget Responsibility) forecast published in March 2012. Weak growth prospects, both globally and in the UK, will make it necessary to keep official interest rates at very low levels for at least another year.’
• Spain’s manufacturing sector saw contraction in May worsen to more than the contraction rate for Greece, according to Markit’s eurozone manufacturing purchasing managers’ index. The index for the whole eurozone dropped to 45.1 from 45.9 in April. Any figure below 50 is a contraction in the sector.
Spain’s figure of 42.0 was the worst in the eurozone, dropping below Greece’s level of 43.1. This is Spain’s fastest rate of decline in its manufacturing sector since May 2009.