Press Release

Embargoed until 00:01hrs

Monday 7 October 2002

LITTLE SIGN OFA PICK UP IN THE ECONOMY,

SAYS IOD

The Institute of Directors released the results of its Business OpinionSurvey for the third quarter of 2002 (September) today. Company performance wasessentially flat (Junes figure was the worst since the current IoD surveystarted in March 1996), output growth had weakened, the employment record waspoorer, profits remained depressed and there was a further weakening of totalorder books. But optimism was modestly better than in June and export ordersstaged a recovery. The IoD said that the retrenchment in business activityrecorded in June (after Marchs optimism) had continued into autumn.

Ruth Lea, Head of thePolicy Unit, said:

Our latest surveysuggests there is little hope for an early pick up in activity. Companyperformance, output growth and total orders were at their weakest since ourcurrent survey started in 1996. Investment intentions and profits, with costincreases outstripping price increases, were also down. The possibility of theChancellors growth forecast for 2002 of 2 to 2 per cent being achieved looksremote. Indeed 1 per cent is far more likely.

Looking forward,Britains economic prospects will remain blighted by the impact of fallingstock markets on business and consumer confidence and the internationalsituation. The US economy is seriously out of balance and damaged by corporatedifficulties, Germanys economy has lost buoyancy and the threat of war overIraq hangs over the global economy. Even though rising public spending andmodest cuts in interest rates will help support the British economy next year,we expect consumer growth to weaken as the housing market eases andunemployment rises.

The IoD said that thethird quarter company performance figure, even though marginally higher than inJune, remained well down on the levels recorded in 2000 and the first half of2001. Company performance has effectively been sliding since June 2001. Eventhough the majority of respondents reported that their companies were stillperforming well, the balance of those companies performing well, minus thoseperforming badly, was 62 per cent in September compared with 80 per cent in June2001. Output growth was down in September with the balance of directorsreporting higher output minus those reporting lower output recorded at 24 percent, the lowest since the current IoD survey started in 1996. Total orderbooks were also at their weakest since 1996, even though there was some pick upin export order books. The survey results for whole economy profits wereslightly down and investment intentions also weakened.

Business optimism,however, picked up after Junes slump but was, by recent standards, quite low.The balance of companies which were more, rather than less, optimistic abouttheir companys prospects (relative to the previous quarter) in September was27 per cent compared with 23 per cent in June and 40 per cent in March.

Price pressures remained weak, with many more respondentsreporting increased costs than increased prices putting a squeeze on margins.Average settlements were around 3.9 per cent in September compared with Junes3.6 per cent and Marchs 4.0 per cent.

The September datafor manufacturing industry were better than in June when manufacturing output,according to official figures, was distorted down by Jubilee and World Cupevents. Even though manufacturing continued to under-perform the rest of the economy,the gap was further eroded in September.

Ends 3.9.02 No.124

Notes to Editors:

1.       Data fromprevious surveys is attached.

2.       The IoD(Institute of Directors) is a non-political independent organisation

withover 55,000 members. In addition to its wide range of business services, the IoD provides aneffective voice to represent the interests of its members to government and keyopinion-formers. It also brings the experience of business leaders to bear onthe conduct of public affairs.

Contact Points:

Richard Taylor, PressOfficer, tel: 020 7451 3264

mobile and out of hours: 07721 734886

David Marshall,Director of Public Affairs, tel: 020 7451 3263

mobile and outof hours: 0776 4883420

email: press@iod.com

web: www.iod.com

The main results ofBusiness Opinion Surveys since 2000 first quarter are shown in the table below(all the data related to balances expect for pay settlements which relate to anaverage):

	00 Q1	00 Q2	00 Q3	00 Q4	01 Q1	01 Q2	01 Q3	01 Q4	02 Q1	02 Q2	02 Q3
Company performance	82	78	76	75	78	80	76	72	67	61	62
- of which manufacturing	73	68	70	59	72	72	76	63	58	51	58
Optimism	57	49	39	35	28	28	23	10	40	23	27
- of which manufacturing	44	40	38	22	3	19	16	12	32	12	28
Capacity utilisation	-10	-17	-8	-6	-13	-22	-7	-21	-29	-25	-21
- of which manufacturing	-21	-32	-27	-31	-18	-42	-4	-34	-39	-39	-14
Order books (total)	35	23	24	27	20	9	11	6	7	-2	-6
- of which manufacturing	20	19	22	20	16	-10	6	-1	-4	-1	-7
Export order books	11	20	2	0	7	0	-1	-17	4	-2	10
- of which manufacturing	14	15	5	-11	6	-20	-21	-26	3	-8	4
Employment (reported)	37	31	22	25	22	18	28	11	12	13	4
- of which manufacturing	17	27	26	12	5	-7	18	-2	-2	-3	-10
Output (reported)	58	48	41	43	40	40	38	33	36	29	24
- of which manufacturing	45	41	39	43	24	25	31	20	28	24	31
Costs (reported)	42	43	36	38	35	31	26	14	23	19	19
- of which manufacturing	38	44	35	48	31	18	21	2	26	16	19
Prices (reported)	4	6	7	8	9	8	2	-1	4	-5	-1
- of which manufacturing	-7	-6	-3	-5	0	-1	2	-19	-5	-21	-23
Profits (reported)	23	21	19	18	23	17	21	13	9	9	7
- of which manufacturing	-3	16	17	6	14	8	19	6	-8	5	8
Pay (per cent)	3.9	4.6	4.1	4.6	4.1	4.1	4.3	4.6	4.0	3.6	3.9
Investment outlook*	Na	Na	Na	Na	Na	Na	Na	Na	Na	12	2
- of which manufacturing*	Na	Na	Na	Na	Na	Na	Na	Na	Na	7	1

*aggregate series only available from 2002Q2