UK factory orders suffer biggest drop since 1992

British manufacturers' orders fell at their sharpest pace since July 1992 in January despite sterling's weakness as the global economic slowdown is taking a heavy toll on demand, a survey showed on Wednesday.

The Confederation of British Industry's monthly Industrial Trends survey showed the factory orders balance tumbled to -48 in January from -35 in December. Analysts had only forecast a decline to -39, and the data is further confirmation that Britain is likely to face a deep downturn this year.

"Sentiment and the outlook for the next three months are also very negative. Most firms expect conditions to get even worse, with further falls in orders expected, leading to more job cuts," said Ian McCafferty, the CBI's Chief Economic Adviser. "Companies unsurprisingly plan to cut back investment sharply over the next year."

The balance measuring companies' expectations for output over the coming months fell to -43 from -42, the weakest since July 1980.

"This is still consistent with contractions in manufacturing output of a whopping 10 percent per annum," said Jonathan Loynes, UK economist at Capital Economics.

Particularly worrying was the failure of sterling's sharp decline versus the currencies of Britain's major trading partners to give any visible boost to exports.

The export order book slid to -39 from -33, and firms expect to lower their export prices over the next three months, with the quarterly index plummeting to -10.

The separate quarterly business survey showed firms increasingly pessimistic about the outlook, with the balance dropping to -64, the lowest since July 1980.