UK manufacturing sector limped back to growth in June

The meagre increase in manufacturing growth further dented hopes that the UK's factories were roaring back to life

Martin Rickett/PA Wire A car production line
A car production line

Britain’s manufacturing sector limped back to growth in June as output rose by a smaller-than-expected 0.3% after going backwards in May, official figures showed.

The meagre increase further dented hopes that the UK’s factories were roaring back to life, and confirmed that the sector’s quarterly performance was at its weakest since last year.

It also led to a call for the Bank of England’s Monetary Policy Committee (MPC) not to “jump the gun” on hiking interest rates as members mull their latest decision to be announced tomorrow.

Analysts said the strength of the pound and the weakness of the eurozone economies could be holding back growth in manufacturing.

Data from the Office for National Statistics (ONS) showed that the sector grew by just 0.3% in June compared to the previous month. In May, it had contracted by 1.3%.

In the wider production sector, which also includes sub-sectors such as mining and quarrying, water supply and sewerage, figures showed growth of just 0.3% in June.

The data confirmed an earlier ONS estimate that manufacturing grew by just 0.2% over the course of the second quarter.

June’s figures showed that it was 1.9% up on last year but the sector remains 7.4% off its 2008 pre-recession level.

Separate surveys have suggested there was a further slowdown for manufacturing in July, despite good overall growth led by the UK’s dominant services sector.

Scotiabank economist Alan Clarke said the strength of the pound “could be having a bit of a dampener” on manufacturing.

He added: “Furthermore, eurozone demand for our exports is still sluggish so it is hard to get too upbeat from here.”

Paul Hollingsworth of Capital Economics said: “June’s industrial production figures confirm that the onus remained on the services sector to keep the recovery chugging along in the second quarter.”

Howard Archer of IHS Global Insight said: “A smaller than expected rebound in manufacturing output in June adds to signs that the sector has recently lost some momentum from robust levels at the start of this year.

“This is disappointing for hopes that UK growth can be broad based on a sustained basis going forward and less dependent on services sector.”

David Kern, chief economist at the British Chambers of Commerce, added: “There are a number of uncertainties still facing the economy, and we would urge the MPC not to jump the gun on interest rates. Our view remains that the risks to the economy of raising rates too early are much greater than the risks of waiting just that little bit longer.”


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