UK manufacturing sector growth slumps to a two-year low

Jessica Morris
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The strength of the pound dampened demand for UK exports (Source: Getty)

The UK manufacturing sector grew at its slowest pace in more than two years, partly due to a strong pound strangling European demand for exports.

The Markit/CIPS manufacturing purchasing managers' index (PMI) fell to 51.4 in June, the lowest since April 2013, and from a downwardly revised figure of 51.9 a month earlier.

However, the survey was still above the crucial 50 mark, which is the difference between growth and contraction.

"The UK manufacturing sector had a disappointing second quarter overall," said Rob Dobson, an economist at Markit.

"Growth trends in output and new orders were the weakest since the opening quarter of 2013, as a strong sterling exchange rate and subdued demand from mainland Europe offset the continued solidity of the domestic market."

The pound dropped sharply against the greenback on the news, sliding 0.25 per cent to $1.5680.

Meanwhile, economists warned that the UK's lopsided economy is likely to remain largely reliant on domestic demand to drive growth.

"Lacklustre manufacturing activity is worrying for hopes that UK growth can become more balanced and less dependent on the services sector and consumer spending," Howard Archer, chief economist at IHS, said.

"There are grounds for hope for manufacturers on the domestic demand front, but the export outlook currently looks highly uncertain. On the domestic demand side, the outlook for consumer goods looks promising given improved purchasing power and elevated confidence.

"On the export front, manufacturers will be concerned about the ongoing strength of sterling against the euro and the threat to Eurozone economic activity coming from the Greek crisis. The hope is that UK exporters will eventually benefit from improved growth in the Eurozone."

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