Engineers call for rates cut

An engineering federation today called on the Bank of England to cut interest rates by a quarter point when it meets tomorrow, in order to protect the sector from renewed weakness in the global economy.

The Engineering Employers' Federation (EEF) cited its latest survey, which showed engineering output and orders have fallen for six successive quarters with the downturn widespread across all industries. The federation now believes more than 100,000 jobs will be cut in the sector this year as a recovery takes longer than expected to materialise.

Stephen Radley, the EEF's chief economist, said global uncertainty, driven by a slump in world trade, had hit investment plans at home.

"Renewed weakness in the world economy and in business confidence has stopped the recovery in UK manufacturing in its tracks. With overall growth slowing and inflation under control, the Bank of England has room to reduce interest rates. A quarter-point cut on Thursday would help to prevent the recovery weakening further," he said.

Interest rates have been held at 4% - their lowest level since the early 1960s - for almost a year. The Bank of England's monetary policy committee meets tomorrow to set rates for September and is widely expected to vote for another no-change. Its decision will be announced at midday on Thursday.

The EEF's survey, from a poll of 1,200 firms, contrasts with a report yesterday that found manufacturing activity expanded slightly in August.

The Chartered Institute of Purchasing and Supply said the rebound was due to strong growth in factory output as order books began to fill up.

Engineering firms make up around 40% of the UK's manufacturing industry.

The EEF said engineering output had fallen by 16% since the end of 2000 compared with an 8% fall in the wider manufacturing sector. It added that all UK regions were suffering with larger falls in production in the current quarter than in the three months to the end of June.