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Shock drop in manufacturing output

A surprise fall in manufacturing output during August underlined the fragility of the UK’s pull out of recession today.

The 1.9% slide - the worst performance since January - comes after two months of growth and confounded expectations of a 0.4% rise.

Overall output from the wider production industries, including mining, quarrying and utilities, fell by 2.5%, the Office for National Statistics (ONS) said.

Experts said the figures meant a return to growth for the overall economy between July and September was now “less certain”.

Capital Economics’ Vicky Redwood said: “August’s dismal industrial production figures will dampen some of the recent optimism about the economy’s apparent bounce-back.”

Tony Sarginson, External Affairs Adviser at EEF Northern, said: “The upturn in the UK’s manufacturing sector is likely to take some time to take hold with cashflow constraints, continued uncertainty about the strength of markets and tighter credit conditions weighing on recovery prospects into next year.

“Manufacturers are telling us that output is starting to stabilise but there is little sign of confidence coming back. Production is well below pre-recession levels and the road to recovery is likely to be long and bumpy. Tight cashflow and continued problems with access to finance are likely to be major roadblocks.

“A negative balance on investment is a particular cause for concern given the need for companies to invest for the upturn. Previous evidence suggests that investment intentions continue to be delayed from some time after the first green shoots appear.

“The government has a key role to play in ensuring these problems don’t prevent companies from making the investments needed to take advantage of the recovery when it comes.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .