The credit crunch is taking its toll on manufacturers, forcing factories to cut overtime and even to move to a four-day week. Night shifts are also disappearing as businesses scale back production to avoid stockpiles of unsold goods.

The symptoms of manufacturing’s plight came as a key survey indicated that industry was buckling in the face of the economy’s deepening woes. Manufacturers suffered record falls in orders last month, forcing them to cut their production at a rate not seen since the end of the last recession, the survey of purchasing managers revealed.

It suggested that overall manufacturing conditions are already the worst suffered since January 1992 – and that they are deteriorating at the fastest rate since then. The news increased pressure on the Bank of England to cut interest rates next week.

Ford has cut back to a four-day week until Christmas at its Transit van plant in Southampton, as has Land Rover at its plant in Solihull. Bentley’s factory in Crewe has been reduced to a three-day week and Toyota has halted the night shift at its Derby works.

Roelant de Waard, chairman of Ford UK, said that consumers were unable to secure the loans required to buy new vehicles. “We assume demand will stay where it presently is unless something is done,” he said. “The affordability and availability of consumer credit has to improve.”

Production cuts are not confined to the car industry. Tetrad, a Preston-based furniture maker that employs 500 people, moved to a four-day week three weeks ago because the housing downturn hit the number of orders. The company had already laid off 19 staff and 35 temporary workers in the past six months, and turned to the four-day week as a last resort after autumn orders failed to pick up.

The EEF manufacturers’ organisation said that several members had made inquiries in recent months about the legality of short-time working. It can be worthwhile for companies to pay workers to stay at home because it helps them to avoid overproduction and reduce overheads.

The practice has angered the Unite union, but others accept it as a preferable alternative to redundancies. Dave Osborne, national officer of Unite, said: “Ford workers in the UK have continued to deliver major improvements in efficiencies and cost reductions. Europe has been Ford’s saving grace and the UK is Ford’s biggest European market.”

British manufacturers’ difficulty is the result of a combination of rising in-put prices and falling consumer confidence. Nicholas Goss, managing director of Goss Components, a machine parts maker that employs 104 people in northeast London, is enduring one of the worst periods since he joined the family company in 1970. He says that conditions are so bad that he is considering moving part of his operation to the Czech Republic. “Two of my competitors have packed up this year alone. One’s gone to Europe, the other’s in administration,” he said. “We had to let four people go last month.”

Britain’s manufacturing decline can be traced through the headcount at Goss Components. In the early 1970s some 450 people filed through its doors each day. That number had dwindled to about 300 by 1997, when the company lost two big contracts. In recent years the factory has gone from a 24-hour operation to a standard working day and overtime has been unheard of for several years.

The problems afflicting the motor industry are having knock-on effects – about 20 per cent of the parts made by Goss Components end up in cars – and orders last month were 10 per cent down on the previous September. The company’s output is about 40 per cent of that ten years ago.

But Goss is not only dealing with a lack of demand: the price of steel has doubled, the electricity bill increased by £30,000 last year and Mr Goss expects to pay up to 50 per cent more for gas when a fixed contract expires next year. His company is also suffering as a result of the credit crunch.

“We’ve been hit by the new solvent emissions directives, which means we need new kit,” he said. “I can’t borrow the money to buy the new kit because nobody’s lending any money.”

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