Rising costs and fuel bills threaten manufacturing recovery, claims CBI

Manufacturing sector recovery is under threat because of the rising price of oil, gas, electricity and metal, according to the head of the Confederation of British Industry (CBI).

The CBI understands that employers have been reporting 40% average price rises for electricity and gas over the past year alone. Taking account of forecasts for winter prices, the cost of gas and electricity could rise by more than £5 billion next year.

In addition, metal prices are more than 55% higher than the same period last year. This comes hard on the heels of rise in the price of oil, which has soared by almost 75% over the past 12 months.

At the CBI's national manufacturing dinner in Birmingham tonight, where some 900 business leaders will gather for the biggest annual manufacturing event in Britain, Digby Jones will urge the Bank of England to keep interest rates on hold and the government to avoid any moves that would raise prices further.

The employers' body also called on the Chancellor Gordon Brown not to "raise the spectre of further business tax increases" in next month's pre-budget report.

Digby Jones will say: "I am worried that rising costs will take the wind out of the sails of the manufacturing recovery. Earlier in the year - when global demand was stronger - companies were able to raise prices and pass on some costs but this may become more difficult if demand weakens.

"The government should take note of the pressures that companies are facing. There are key decisions coming up on the levels of carbon targets and business taxation. If ministers do anything to harm manufacturers now, they will be scoring a real own goal."

(gmcg/mb)