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Output volumes fall for UK SMEs

The worst performance of British small and medium-sized manufacturers in more than two years.

In a survey of 359 small and medium-sized manufacturers (SME) in the UK, conducted by the Confederation of British Industry (CBI), 28 per cent said that output volumes had deteriorated during the last quarter, while 23 per cent reported a rise in volumes.

The resulting balance of -5 per cent is the first fall since October 2009 (-14 per cent). However, firms expect output to be broadly flat in the coming quarter (+2 per cent).

The research, carried out between 25 June and 11 July 2012, found that export orders declined by 4 per cent during the last quarter, while domestic orders were flat at 2 per cent. Over the next quarter, the CBI expects orders and output prices to fall, while costs should remain flat.

In line with expectations, SMEs increased headcount by 11 per cent during the quarter, though manufacturers expect to hold off hiring for the next quarter. Optimism about the general business situation fell by 13 per cent during the quarter, following an improvement in the previous quarter.

The survey also found that SMEs reduced domestic output prices by 4 per cent, while export prices were steady (-1 per cent) for the third consecutive quarter. Average unit cost inflation (+8 per cent) eased significantly and is now at its lowest since October 2009 (+3 per cent).

Lucy Armstrong, chair of the SME council at CBI, said:

Challenging domestic conditions, continuing uncertainty over the eurozone and a broader loss of momentum in global growth, are clearly taking their toll on the UK’s smaller manufacturers.

Production has fallen over the last three months and sentiment has deteriorated, while growth in demand has stalled, with little improvement expected in the coming quarter. Nonetheless, smaller manufacturers have stuck by their plans to take on more staff - an increase in numbers employed is perhaps one of the few bright spots in an otherwise muted picture.

During the survey period, the pound averaged €1.25 and $1.56, while brent crude averaged $97.14 per barrel (previous quarter: €1.20 and $1.59 and brent crude $123.78 per barrel).

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Geoffrey Howe dies, aged 88

Howe was Margaret Thatcher's longest serving Cabinet minister – and the man credited with precipitating her downfall.

The former Conservative chancellor Lord Howe, a key figure in the Thatcher government, has died of a suspected heart attack, his family has said. He was 88.

Geoffrey Howe was the longest-serving member of Margaret Thatcher's Cabinet, playing a key role in both her government and her downfall. Born in Port Talbot in 1926, he began his career as a lawyer, and was first elected to parliament in 1964, but lost his seat just 18 months later.

Returning as MP for Reigate in the Conservative election victory of 1970, he served in the government of Edward Heath, first as Solicitor General for England & Wales, then as a Minister of State for Trade. When Margaret Thatcher became opposition leader in 1975, she named Howe as her shadow chancellor.

He retained this brief when the party returned to government in 1979. In the controversial budget of 1981, he outlined a radical monetarist programme, abandoning then-mainstream economic thinking by attempting to rapidly tackle the deficit at a time of recession and unemployment. Following the 1983 election, he was appointed as foreign secretary, in which post he negotiated the return of Hong Kong to China.

In 1989, Thatcher demoted Howe to the position of leader of the house and deputy prime minister. And on 1 November 1990, following disagreements over Britain's relationship with Europe, he resigned from the Cabinet altogether. 

Twelve days later, in a powerful speech explaining his resignation, he attacked the prime minister's attitude to Brussels, and called on his former colleagues to "consider their own response to the tragic conflict of loyalties with which I have myself wrestled for perhaps too long".

Labour Chancellor Denis Healey once described an attack from Howe as "like being savaged by a dead sheep" - but his resignation speech is widely credited for triggering the process that led to Thatcher's downfall. Nine days later, her premiership was over.

Howe retired from the Commons in 1992, and was made a life peer as Baron Howe of Aberavon. He later said that his resignation speech "was not intended as a challenge, it was intended as a way of summarising the importance of Europe". 

Nonetheless, he added: "I am sure that, without [Thatcher's] resignation, we would not have won the 1992 election... If there had been a Labour government from 1992 onwards, New Labour would never have been born."

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.