Manufacturing gloom

The latest figures from German industry point to a continuing recession, with substantial falls in orders from the peaks last year. The US is still stronger, but even there the forward indicators are now in negative territory suggesting a downturn. As forecast here we are living through a nasty world manufacturing downturn.

I do find it bizarre that a few people write to tell me the UK share index has gone down this week owing to Brexit, when all the world share markets are flashing red over global events led by EU manufacturing figures.

What can the authorities do about it?

The first thing they need to do is to review their policies towards the vehicle market. There is a gap between what the governments want people to buy and what they are prepared to buy. The big transition from diesel and petrol to electric is proving difficult to achieve at the pace the governments want, leading to a shortfall in demand. As the governments want to intervene extensively  in  this market they need to help the industry adjust.

The second thing is to examine other areas where demand is falling short or capacity is too extensive and see if government itself can speed transition to new products or can stimulate demand for things that are still needed and valued.

General demand for industrial products is affected by numbers in employment, by levels of income, and the impact of taxation. India is now joining the USA with a large reduction in company taxation to act as a stimulus to investment and activity. China has introduced some tax cuts to boost consumer demand. The US and UK have good recent records at increasing employment and real incomes, which should help.

Some believe further monetary activism could assist. Clearly if home loans, car loans and other consumer credit is readily available to those who can afford it, at low interest rates, it should help demand. The US car market looks as if it is improving following interest rate cuts. However, in the Eurozone and Japan official rates are already at or below zero so there are limits to how much monetary action can achieve. The UK does have a severe monetary squeeze which is helping slow our economy.

Those who write in saying we should not borrow more should remember that borrowing is an important part of an enterprise economy. Of course it should not be taken to excess, and lenders need to satisfy themselves that practically all of their borrowers will be able to repay. There is everything to recommend a business borrowing to expand where there is a profitable market to serve. There is nothing wrong with an individual borrowing to buy a home or a decent car if they have reasonable prospects of continuing employment with future pay rises.

The manufacturing fall probably means Germany is  now in overall recession, given the salience of manufacture and the car industry to her economy. China is still growing, but as the world’s major manufacturer it too has been slowed by recent trends.


  1. Lifelogic
    October 4, 2019

    Inded a chasm between cars people want to buy and the ones they are prepared to buy. Their old cars are often superior, more practical all and far cheaper to run. Electric car save no CO2 anyway. We have a government command economy in cars.

    Cheaper on demand energy, more competitive banking, far less government, lower simpler taxes, a bonfire of red tape, a real brexit, no duff worthless degrees (at least 50%) is what is needed. Freedom and choice please get the government parasites out of the damn way.

  2. Lifelogic
    October 4, 2019

    So the virtue signalling idiots in Scotland have banned reasonable chastisement for children. What fools once again the people are right MSPs wrong. It will do huge harm and waste police and court time.

    1. Anonymous
      October 4, 2019

      You can just about guarantee that those against reasonable chastisement of children will be pro abortion of them – and probably pro EU.

    2. margaret howard
      October 4, 2019

      So Lifelogic, you support little people being ‘chastised’ (in other words hit or smacked to make it sound more innocent)?

      But no doubt you don’t approve of an adult hitting another one for behaving badly or being a nuisance.

  3. Mick
    October 4, 2019

    Off topic but not by much
    Surly I’m not the only one being a little bit cheesed off of being held to ransom by the 4.7 million Irish, we the British are your biggest trader and who was it who bailed you out in your financial needs a while back, bloody short selective memories some people and stop using the Irish border as a bargaining tool , we will look after are own north of the border it’s our concern not yours and never will be while Northern Ireland wants to be part of the United Kingdom

  4. Lifelogic
    October 4, 2019

    The BBC seems to be endlessly going on about people taking trains rather than flying – to save the World by saving CO2. They need to do some numbers and take everything into account. Their childish assumptions that train, buses, cycling, walking (transport fuelled by food), electric cars, ‘renewable’ are always good and normal cars, trucks, flights, fossil fuels always bad is simplistic and usually wrong.

    HS2 for example is a massive negative in CO2 terms for example, if you take into account the construction, connections, staffing, track maintenance and the likes.

  5. Mark B
    October 4, 2019

    Good morning.

    Car manufacturing is at the pointy end of the spear when it comes to an economic slowdown. We do not need to keep buying a new car and the one we might have we can keep going a few years more.

    There is a gap between what the governments want people to buy and what they are prepared to buy . . .

    Again, this is the problem – Government interfering in the market. Buying a car or a lawnmower or a suit of clothes is a personal decision involving usually no more that two parties. One has something to sell and, if the other likes it, an offer is made. The problem is that government is dictating what is on offer. If what is on offer does not meet the needs of the buyer then there is no sale. We seem to have fundamental economic illiterates in charge.

    Government, especially here in the UK, is obsessed with GDP. It is obsessed with consumerism and the need for an economy to keep spending. Little or no attention is given to things such as the quality of life.

    From lower demand more efficient practices and products will emerge as companies strive to compete in a smaller market. Consumers will probably downgrade their buying choices preferring not to go for the latest and most expensive product. In time balance will be restored. What we do not need is government interference in rigging the market like it has done with housing with the Right to Buy Scheme.

  6. Dominic
    October 4, 2019

    Keynes reborn. How very predictable.

    In the end all politicians gravitate to the same point. Their desire to intervene in all aspects of human life is driven by a thirst for control, human management and manipulation to achieve a political outcome

    It is a constant battle between private individuals and the political State determined to control our every waking moment

  7. margaret
    October 4, 2019

    You talk about borrowing so long as there is a reasonable prospect of paying back . For people work structure has changed from ,as you have suggested in previous posts a ladder to climb with experience, effort and learning, to the time now where there is little chance of a stable work environment with steps up to increase salary and longevity and therefore the confidence to borrow is affected.

    Industry is so competitive that underhand methods of bringing firms down is easier than increased performance from the competitors.Negative competition is rife.Why go to the lengths of building a business empire when someone sells it off or splits it up , or gives it to other countries to run .. All that effort for nothing. Oh yes that is GB of course.

  8. Martin in Cardiff
    October 4, 2019

    John, I think that some people need to make up their minds.

    One minute we’re hearing that the UK is a world player, the fifth largest economy, but here we are with you implying that global conditions are so overwhelming that UK actions, such as withdrawing chaotically from the world’s richest market have no bearing on them.

    Could you please indicate how the present shambles could in any way be a positive influence on the general picture?


    1. czerwonadupa
      October 4, 2019

      European share of world GDP:
      1974 – 36%2
      2011 – 26%
      2020 – 15%
      Empires always stagnate in the end.
      But Freedom is Priceless

      1. Martin in Cardiff
        October 5, 2019

        Yes the developing world is, er developing, Einstein.

        What would you expect?

        That is good news all round.

        1. Edward2
          October 5, 2019

          Whilst the EU is not.
          Low growth, high unemployment, high taxes high regulations and developing protectionist trade policies.
          It is becoming uncompetitive in world terms which is why it has a falling share of world trade.

    2. libertarian
      October 4, 2019


      For Gods sake buy yourself a copy of business for dummies

      1. Martin in Cardiff
        October 5, 2019

        What is your point then?

        1. libertarian
          October 6, 2019


          My point is you dont have a clue what youre talking about..

          Markets respond to all kinds of things and they rise and fall depending on all kinds of activities AROUND THE WORLD.

          The current “problems” have NOTHING to do with an EVENTUAL Brexit . The UK leaving on WTO terms will not destabilise markets in any material way in most of the world, just in the EU .

          The EU is a backward looking institution that is desperately shutting down innovation in loads of areas due to protectionist regulations. Thats why its share of world GDP is falling so fast

  9. Fedupsoutherner
    October 4, 2019

    Hammond’s taxation on diesel and their policies regarding the demise of diesel have definitely played a part in the reduction of sales in this area. JLR was doing really well up to this point when government intervention crushed it. One of their salesmen who had worked for them for years was amazed by the detrimental effect it had. Sometimes governments are industries worst enemies. Hammond has a lot to answer for. Still, Brexit can be blamed.

  10. Lifelogic
    October 4, 2019

    Increasing the minimum wage, as the foolish Javid proposes (combined with the absurd expensive ‘renewables’ agenda) will further damage manufacturing, destroy jobs and push even more manufacturing overseas. Funny to see the total incompetence of Extinction Rebellion types with their blood spraying fire engine. Why are the authorities treating this evil, dangerous and totally misguided organisation with such kid gloves?

  11. Pete S
    October 4, 2019

    If the USA impose tariffs on cars, can’t see much of a market, with 25% import duties.

    1. dixie
      October 5, 2019

      Or they could build the vehicles in the US like VW (Tennessee), BMW (South Carolina) and Mercedes (Alabama) already do.

  12. /ikh
    October 4, 2019

    Sir John,

    I have to disagree with some parts of your post. You can not push people to transition to electric vehicles when there is no infrastructure to support recharging. There is no technology to support fast ( in minutes recharging ). And the vehicles are not economic without substantial government subsidies.

    With regard to the money supply and debt. The market is totally distorted by the ridiculous level of the Base Rate. The Govt borrows at around 2.5 percent and any Base Rate lower that this is ludicrous and distorts the market.

    The Government also needs to reduce debt, as a proportion of GDP. And then add PFI to the debt total.


  13. Roy Grainger
    October 4, 2019

    The UK share index has gone down this week partly because we are still in the EU and so subject to new tariffs planned by the USA to punish the EU for breaking WTO rules subsidising Airbus. Some UK companies get hit as collateral damage. Pity the EU isn’t a law abiding body.

  14. Shirley
    October 4, 2019

    The Euro has been an unmitigated disaster, but the EU will throw unlimited cash at it, as it is the cornerstone to a federal EU.

    How many EZ countries are unable to repay their debts, and there is no optimism that they will ever be able to repay them. The wealthier EZ countries should write off the debts and then boot them out the Euro and the EU, but we know the debts will be passed onto the UK, among others, and the EU will never kick out a member, despite all the threats to do so. They won’t risk losing part of their ’empire’. They will just enslave them, as they tried to do with the UK.

  15. Derek Henry
    October 4, 2019


    There is a word that loses its meaning when it comes to the government accounts.

    Government borrowing is not like that of a household or business. Infact, it is not fiscal policy at all but monetary policy.

    A reserve drain so the BOE can hit its overnight interest rate whilst balancing the overnight interbank market.

    It is very sad that 95% of voters think government borrowing is like that of a household and business. Ignorance always stops us from doing the right things.

    Government borrowing is simply an asset swap a reserve drain at the BOE with no taxpayers or grandchildren in sight.

    1. Edward2
      October 5, 2019

      You fail to take into account the inevitable effects of inflation and the effect on currency value on international exchange markets.
      We already create huge amounts of magic money.
      All you propose is creating even more.
      Like a shipwrecked sailor drinking sea water to survive.

  16. stred
    October 4, 2019

    Boris has been manufacturing gloom with his WA Mk II.

  17. Alan Jutson
    October 4, 2019

    Indeed it is World-wide, you simply cannot expect growth to continue for ever, without there being some hiccups on the way, the problem arises when some so called hiccups are not just temporary, and when all so called hiccups happen at the same time all over the World.

    So we appear now to have not only a problem with many Governments and the people, but many Governments and business !

    Then of course we have Climate change regulation and the so called green taxes still to work their way through the system, just to complicate matters further.

    Seems like Governments should realise they are part of the problem, not the solution.

    International World wide trade is becoming ever more important, so the more places you can export to, the better, providing they pay on time of course.

  18. Dominic
    October 4, 2019

    Why are employment levels a political consideration? I am intrigued as to why government feels it necessary to try and manage this area of human activity.

    Why do politicians concern themselves with the economic fortunes of people in the real world? Is it human concern or are their concerns driven by nothing more than the political fortunes of themselves and the parties to which they belong?

    One of Thatcher’s main attractions was her absolute sincerity and embrace of reality. It’s a quality not many modern politicians possess. We need more honesty

  19. oldtimer
    October 4, 2019

    Two observations about the car industry. In the USA car finance is already stretched; 7 year terms are apparently quite common and there is even talk of 8 year year terms which seems grossly excessive to me for such a depreciating asset.

    It is also evident that while drivers like the instant torque on demand provided by battery electric vehicles, they are less enamoured by limited, unreliable recharging networks. Sales are heavily contingent on government subsidies. Range remains an issue; range is severely constrained when towing. Battery weight and cost remain significant barriers to adoption. Some manufacturers are now openly sceptical about the resolution of these problems and are considering alternatives. We are faced with yet another example of politicians forcing unnecessary costs on people on the back of their arrogant “We know best” mentality.

    1. Alan Jutson
      October 4, 2019


      Always possible that Government will u turn on electric in the fullness of time, just like they did on diesel.

      I will not even think about purchasing an electric vehicle for very many years yet.

    2. Mitchel
      October 4, 2019

      There is a very interesting interview with former GM vice-Chairman,Bob Lutz,on RT’s Sophie & Co Visionaries series today,focussing on driverless cars and their impact.”All Bentleys,BMWs and Mercedes will be gone in 30 years according to him”-he means all luxury brands in big city environs.

      Given the vast amounts of money the ambitious mayor of Moscow has spent on digitising infrastructure and access to public services in the city,I would not be surprised if Moscow was the first megacity to introduce large scale use of such vehicles.

      1. Mitchel
        October 4, 2019

        First in Europe I mean!

  20. Ian Wilson
    October 4, 2019

    Both Germany and the UK are following economically suicidal climate and energy policies centred around hysteria over an insignificant problem, badly damaging manufacturing.

    Last month 500 professional qualified scientists wrote to the UN stating there is no climate emergency, little or no connection between CO2 and climate, that warming is largely or wholly part of a natural cycle and that the rise in CO2 is beneficial in boosting crop yield. They asked for the letter to be included on the agenda for the climate conference. The UN refused, preferring to hear endless diatribes from a schoolgirl with no qualifications to 500 real scientists. Most regrettably, our government also prefers to heed ignorant rabbles to qualified scientists, the ludicrous and ruinous zero carbon target being the result.

    1. John C.
      October 4, 2019

      It is madness, and something as far as I can see unparalleled in recent history.

  21. agricola
    October 4, 2019

    get Brexit done, specific FTA deal or WTO deal and then create a tax environment in the UK that encourages the creation of personal, company and national wealth .We can then afford the health and social care systems we wish to maintain, fund and create.

    1. Alan Jutson
      October 4, 2019


      I wish !

  22. Alec
    October 4, 2019

    The reason people aren’t buying electric cars is that they are very expensive, have very poor range, are actually more polluting than conventional cars, have a short lifespan and this is obvious to anyone that takes the time to look into it. In short they are a scam to rip people off and reduce their mobility. Clearly a lot of people realise that.
    The property market has been inflated so much and so long by government and banks that to buy a house is to indenture yourself for decades to the benefit of bankers. More loans and more debt is the last thing the world needs.

    1. IanT
      October 4, 2019

      If you want to be friendly to the environment, then buy a small petrol car, look after it (have it serviced regularly), drive it carefully and most of all – keep it for more than three years…preferably much, much longer. This will also be kind to your wallet too!

  23. Anonymous
    October 4, 2019

    My thing has always been that when I’m earning it, or when I have it, I spend it as locally as possible. Otherwise recessions become self fulfilling. Don’t be a tight wad and try products out in the shop then buy it on line to save a few quid – go back and deal your locals down a bit if the gap is too large.

    Don’t go running a bar for your club for free, nor a coffee shop for the church (we have one here.) You’ll be putting others out of work.

    The best charity you can give is to use your local shops and trades as much as possible.

  24. IanT
    October 4, 2019

    Movements in the FTSE 100 are often linked to changes in exchange rates, given that many larger UK companies (such as BP) earn much of their income overseas in dollars. So when Sterling is up, the FTSE tends to fall.

    Remainers can’t have it both ways though – complaining about falls in Sterling (when the FTSE goes up) and then complaining about falls in the FTSE (when Sterling is up).

    Reply Smaller companies with more domestic earnings have performed well since June 26th 2016

  25. gyges01
    October 4, 2019

    To what extent do you think Brexit hoarding both by the consumer and by business has disguised lack of demand in the economy?

    Reply Q1 stocking up, Q2 destocking to some extent

  26. Everhopeful
    October 4, 2019

    But how can anyone have reasonable prospects of continuing employment with future pay rises?
    To get people spending govt needs to make them feel happy, free confident and safe.
    For years now it has done the complete opposite.

  27. sm
    October 4, 2019

    I can’t help wondering if manufacturers and retailers of consumer goods have completely lost the plot.

    Big and apparently successful companies gobble up smaller ones and then discover they have overstretched themselves, they abandon their established principles that made them successes in the first place, cheapen/reduce their products to attract a different market that actually isn’t interested anyway – M&S, John Lewis etc in the UK, others elsewhere. And the same applies to the entertainment and restaurant spheres. But these companies often still have sufficient clout to get political and financial backing, thus prolonging the suffering for the average worker and consumer, while a handful of directors tuck away their hefty bonuses (Thos Cook etc).

  28. BOF
    October 4, 2019

    Seeing we now have a banker in No. 11 I would expect all your sensible ideas to be rejected Sir John.

    The zero carbon policies are likely to cause any recession to be far worse than it should be. However all political parties seem to signed up to this stupidity based on fraudulent science.

  29. A.Sedgwick
    October 4, 2019

    VW are reportedly in hot water from the politburo over plans to build a factory in Turkey – brought a big smile to my face. About time they built one in the UK, especially since the Golf is the top UK seller.

    1. Prigger
      October 4, 2019

      It is part of Germany’s expansion and interplay with geo-political-economic forward bases. But admittedly I hear Germany as it were from an entirely different perspective than normal people.

    2. Martin in Cardiff
      October 4, 2019

      Turkey is in a customs union with the European Union.

      I think that I need say no more.

      1. Edward2
        October 4, 2019

        If you go on the EU’s own website is says “the EU and Turkey are linked by a customs union agreement.
        It says ” the EU-Turkey Customs Union is a separate customs union.

        It might appear pedantic but it is more of a trade agreement than full membership of the CU.
        I note you say “a” customs union not “the” customs union.

      2. libertarian
        October 4, 2019

        Martin in Cardiff

        “Turkey is in a customs union with the European Union.”

        So what? You need say no more because you have no idea what your talking about

        VW say that they will build the Skoda and Passat ranges there for export to Russia, Middle East and other export markets so what use is the customs union to that ? They will move Passat production from Emden, Germany ( also in the CU??) smh

        1. Martin in Cardiff
          October 5, 2019

          They won’t build a new plant here though will they? Can you name a company that will?

          Go on…

          1. Edward2
            October 5, 2019

            Complete red herring Martin.

          2. libertarian
            October 6, 2019


            Easy peasy , tell me when to stop

            British sports car manufacturer Lotus is investing £100 million and creating hundreds of new jobs at its Hethel site in Norfolk

            Jaguar Land Rover delivers a £500m vote of confidence in Britain as it opens the UK’s biggest state-of-the-art car design centre Gaydon Warks

            Luxembourg-headquartered International Automotive Components expects to create 400 jobs at its new Solihull plant.

            INEOS new factory for British car-making with production of the Grenadier, a new 4×4, to be located in Bridgend, South Wales, providing 500 skilled jobs.

            American-owned agricultural, construction and forestry machinery manufacturer JohnDeere
            to build new £2 million facility in Perth.

            BMW opened new factory in Oxford to build electric mini

            Norton’s new 15,000 sq ft factory taking shape at its Castle Donington base in Leicestershire. Sources 83% of components from UK suppliers and exports around 80% of its finished bikes

            JCB invested £110m developing the XSeries, one of the biggest investment programmes in its history. The British manufacturer is opening a new £50m factory in Staffordshire

            LondonEVCompany the pioneering manufacturer launches a new electric van and by 2022 expects 70% of the vehicles built at its new Coventry factory

            Commercial vehicle accessory manufacturer
            rhinoproductsUK new 87,250 sq ft factory build project in Ellesmere Port

            Oxfordshire-based prodrive
            opens new £5 million Powertrain Development Centre at its Banbury HQ

            New autonomous vehicle specialist aurrigotech based in Coventry.

            This new Nissan LEAF, , is now rolling off the line at the company’s record-breaking Sunderland Plant, using advanced lithium-ion batteries manufactured in Nissan’s new UK Battery Plant. Following £420 million investment in Sunderland plant

            Theres loads more

  30. J Bush
    October 4, 2019

    Politicians may want to dictate what the populace should buy and from where. They may change rules to force businesses to change to what they manufacture, but they cannot force the consumer to buy.

    Subsequently, businesses and the economy will suffer. Why? Because very few politicians actually have any real first hand experience of work in the real world and even fewer have set up, successfully run a business and it shows. Their slavish belief in ludicrously myopic ideologies such the EU or purportedly damaging man-made climate change (the global warming label had to change, because that has been proved to be false).

    My car is old, but the mechanic who services it says it is a good reliable car and will run for years. So politicians can prate all they like, I will not be buying an electric car and I will choose which countries I will support when I buy my consumables.

  31. Mockbeggar
    October 4, 2019

    The principal problem with electric cars is the battery. Until someone can come up with a new way of storing electricity that is efficient, cost-effective and uses plentiful types of chemicals, they will be rejected by many car users. Batteries at present use earth metals, often imported from China halfway across the world and/or are very nasty chemistry both to make and to recycle.
    Whoever comes up with a new type of battery could make many millions – both of batteries and of money.

  32. ferdinand
    October 4, 2019

    The motor manufacturers have themselves to blame to a marked degree by building gin palaces as Dealerships and taking these cost out of the vehicles. Prices could be much lower if they shed some of theses enormous premises and concentrated on 20 or so very large new car emporiums leaving the dealers to carry repairs, servicing and used car sales.

  33. Mike Wilson
    October 5, 2019

    Same old, same old.

    Problem: How to run an economy of 65 million people on a small island.

    Solution: Get everyone to borrow at currently low interest rates to buy as many cars
    as possible and consume as much of the earth’s resources as possible.

    Alternative: Devise a long term plan to make this country self sufficient in food and (renewable) energy production, importing as little as possible. Repatriate manufacturing and make things here causing as little pollution as possible. Move away from endless consumption and build a society where more people work providing decent services for us all.

    1. Edward2
      October 5, 2019

      Your siege economy idea in a modern internet based global world would turn the UK into an economy as poor as East Germany became behind the Berlin Wall compared to West Germany.
      I would take a guess at 6 to 8 million unemployed and tax rates higher than any where in the world.
      Would you stop people leaving as well?

  34. dixie
    October 5, 2019

    If the government really want to assist local manufacturing and product development then they should do what the majority of other governments do which is to have a policy and programme of buying local first and insisting that their suppliers adopt the same. If the government at all levels buys non-local goods and services then they need to provide substantial justification.

    It has kept French, German and Japanese industrial sectors healthy, the US is onshoring and the China 2025 programme unashamedly has that goal.

    Secondly, stop the cancer of residential development replacing light industrial sites. Not everybody can or wants to work in an office, if there are no places to establish industrial and engineering start ups there will be no growth.

  35. Julian Dorey
    October 6, 2019

    The issue with wealth inequality is that the borrowing associated with housing has boosted prices beyond affordability for so many. Prices follow money so the ease of borrowing for residential property purchases have created a generational chasm that cannot be mended without massive interventions from the banking cartels and the government. A truly conservative, Conservative party should conserve the opportunities we took for granted and do so while encouraging family formation. If the banks restrict borrowing while the government steps in as a buyer and re fitter of housing sold into the market, we could get a new wave of social housing for cheap rental (£300 pcm) to young married couples.

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