Manufacturing businesses across Britain need state support “within days or weeks” to prevent a wave of company failures and collapses as the recession deepens, a leading industry organisation warns ministers today.

The Engineering Employers’ Federation (EEF) fears that another 90,000 jobs could be lost in manufacturing next year as the downturn cuts a swath through the sector and the body today makes a new plea for the Government to throw a lifeline to embattled industrial groups.

The EEF’s move to step up pressure on Lord Mandelson, the Business Secretary, to deliver more emergency support to industry comes as large sections of the manufacturing, electronics and engineering sectors fight for survival as demand plunges and they face a drought of available finance.

Lord Mandelson signalled last week that he was drawing up plans to help competitive and viable industries and businesses through the recession, but he insisted that the Government could not “bail out” every ailing company nor “prop up companies that are not viable”. He also sounded a warning that “the deeper we get into recession, the higher the costs of climbing out will be”.

The Bank of England is set this week to step up its own efforts to limit the extent of the recession. After last month’s drastic 1.5 percentage point cut in interest rates to a 54-year low of 3 per cent, the Bank is expected to make a further reduction in base rates of between a half-point and a full percentage point to levels not seen since the early 1950s.

Steve Radley, the EEF’s chief economist, said that the organisation would not normally support state aid for industry but that the situation was now so critical for many viable companies that there was no alternative. Immediate government action was needed and ministers should “look at some form of state guarantee for lending, and access for credit insurance”, he said.

The appeal by the EEF, which usually tries to present a confident picture of manufacturing, comes after a similar outcry for government help from the car industry last week. It, too, gave warning that it needed urgent help and hoped for something to emerge within two weeks.

Industry representatives feel that the Government is listening seriously to the appeals, but that it is unsure how to respond to the size of the crisis, and the speed with which it is unfolding. Mr Radley said: “I think they do want to help, but they are being asked to do things that governments haven’t considered in many years, perhaps ever.”

The EEF’s appeal today comes as its latest survey of business conditions reveals huge drops in orders, output and confidence among its members. There is pain in all sectors of manufacturing, but it is most pronounced in the motor industry, the EEF reports. Problems in the automotive sector, the most consumer-dependent heavy industry, have grown in recent weeks, as sales have slumped and big manufacturers have run out of cash.

The EEF fears a devastating blow to the closely interwoven network of suppliers to carmakers, many of them smaller businesses, and side-effects for other industries that use the same specialist engineering services.

In its latest forecasts, the EEF says that engineering industries will shrink by 6.3 per cent next year, after contracting 1.6 per cent this year, and manufacturing will shrink 5 per cent next year after a 1.3 per cent decline this year.Mr Radley said: “What marks this downturn out from others is the alarming rate at which conditions have deteriorated through the autumn due to the problems in the financial markets.”

Bob Hale, head of the Grant Thornton accounting firm’s manufacturing group, said that without additional government help “the sector faces a very bleak outlook for 2009”.

Going to the wall

- The number of businesses going to the wall is set to soar by almost 50 per cent next year as the downturn bites ever deeper on corporate Britain, a leading accounting group forecasts today.

- In its latest Industry Watch report, BDO Stoy Hayward projects that after 21,900 businesses are forced into liquidation or administration this year, a further 32,300 will go under next year and 32,400 more will fail in 2010.

- If the prediction is fulfilled, this would drive the total number of business failures to a level just short of the record annual total of 33,900 recorded in 1992, at the end of the last recession.

- BDO forecasts that the worst-hit sector next year will be construction, with a projected 6,400 businesses in the building industry set to collapse by the middle of 2009, followed by business services, with 5,700 failures expected by mid-year.

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