Companies say recovery under way but patchy: Car production reaches a 19-year high

THE BRITISH Chambers of Commerce said yesterday that Britain was enjoying a gradual, broadly based recovery, but that the economy remained weak in crucial areas.

Vehicle production figures also painted a mixed picture, with car production at a 19-year high for the time of year while commercial vehicle production continued to plummet.

The BCC's quarterly survey of 9,000 companies showed growth in domestic orders for manufactured goods and for services rising to its highest for over three years. But the BCC said companies were worried by a slowdown in growth of manufacturing exports.

'Our ability to compete internationally remains patchy. The slowdown in export growth comes at a time when many of our overseas markets, especially in the European Community, remain depressed or face deepening recession,' said Christopher Stewart-Smith, BCC president.

The BCC said companies were increasingly worried by higher raw materials prices and competition from imports. Smaller firms were facing severe cash-flow problems and there had been little improvement in firms' ability to recruit skilled staff.

More than a fifth of manufacturers said they were working at full capacity, up on the previous three months. A balance of 13 per cent of manufacturers said they were proposing new investment in plant and machinery, with a balance of 5 per cent intending to invest in new buildings.

'Although this rise in investment intentions is encouraging, it remains low,' the BCC said.

Most firms in both manufacturing and services expected to take on more staff in the next quarter, for the first time since early 1990. Manufacturers continued to cut jobs in the past three months, while employment in services was static.

Car production last month reached its highest June total for 19 years as manufacturers geared up for what they hope will be an August sales bonanza. However, output of commercial vehicles continued to drop, falling by nearly 40 per cent compared with June last year.

The Society of Motor Manufacturers and Traders, which publishes the statistics, was at a loss to explain why one set of figures pointed to recovery while the other indicated deepening recession.

June car production reached 134,753 - the highest for a single month since November 1990 and the highest June total since 1974. It was 4.3 per cent up on the same month last year.

The increase in output helped to take car production for the first six months of the year to just under 743,000 - an increase of 8.2 per cent on the same period in 1992.

Production of cars for export was up by less than 1 per cent on June 1992 - suggesting the dramatic decline in most Continental car markets is beginning to hit British manufacturers.

Commercial vehicle output - a traditional indicator of economic health - shows no sign of recovery. Last month's fall in production of nearly 11,000 vehicles left output over the first six months down 24 per cent on last year.

Further good news on the economy is expected today, when figures for gross domestic product in the second three months of the year are published.