Demand for UK manufactured goods fell at its fastest rate in thirty years in the first quarter, but firms are confident that the pace of decline will slow slightly in the next three months, the latest quarterly Industrial Trends survey by the Confederation of British Industry revealed Thursday. For the first time, in seven quarters, business sentiment fell at a slower rate.

The CBI found 60% of firms reporting a fall in the volume of new orders in the first quarter compared with the previous quarter, and 13% reporting an increase, giving a balance of minus 47%, the lowest in nearly 30 years.

CBI's Chief Economic Adviser Ian McCafferty said, The first quarter of 2009 was extremely tough for UK manufacturers but this survey shows firms hope that the worst may be behind them, with the pace of decline slowing slightly.

The very sharp falls in demand have resulted in continued job losses. Employment fell at the sharpest rate since October 1991 with a balance of minus 48%. The survey found firms expect to continue making job cuts, albeit at a slightly slower pace next quarter.

The CBI estimates that 62,000 jobs were lost from the manufacturing sector in the first quarter and another 51,000 will be lost when it comes to the second quarter, bringing the total employed in manufacturing to 2,666,000.

Further, it said domestic demand fell slightly faster this quarter than in the three months to January. The volume of new export orders declined more rapidly in the last three months than firms had hoped. Manufacturing output fell faster than expected in the past quarter, with the balance of minus 53%, the lowest since records began for this measure in 1975. Further contraction is expected in the next three months, but at a slower pace, a balance of minus 32%. Business sentiment continued to decline in the first quarter, but at a slower rate than in the previous quarter.

Firms' investment intentions continue to be scaled back, with plans for training and re-training cut at the fastest rate since records began for this measure in 1989. For the second quarter running, the proportion of firms citing internal finance as likely to limit investment over the coming 12 months is the highest since this series began in 1979, the CBI said.

Moreover, the survey unveiled a dramatic rise in manufacturers concerned about access to credit or finance limiting their output in the next three months, with 26% the highest proportion since this record began in 1960.

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