Slowing manufacturing output holds back UK economy

Jasper Jolly
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While manufacturing productivity remains high, output has been weak in 2017 (Source: Getty)

Slowing manufacturing output continued to drag back the British economy in September, according to a index released today.

Output across the UK economy dipped from an index reading of 100.3 to 99.9 last month, the output index compiled by accountants BDO revealed. That meant it dipped below the long-term growth trend, marked by a reading of 100, for the first time since June of last year.

BDO’s data, based on a weighted average of leading business surveys from the Confederation of British Industry, the Bank of England and IHS Markit, shows a steep fall in manufacturing order book expectations over the last two months, with the index falling by 5.6 points from July to August followed by another 2.7 points in September.

Read more: The UK's manufacturing sector was weaker than expected in September

The manufacturing sector has been the most problematic of the UK’s major sectors to measure over the past year: official data have shown manufacturers struggling for growth, despite business surveys showing buoyant order books.

The contradictory data have caused uncertainty around the effects of the sterling devaluation since last June’s Brexit vote, which some economists claim has made British manufacturers more competitive by making their exports more attractive in a foreign currency.

Weaker surveys in the past month suggest the boost may not be coming through as expected, although the latest manufacturing data was stronger than the start of the year.

Read more: British manufacturing now eighth largest in the world

Peter Hemington, a partner at BDO, said: “UK manufacturers seem not to have benefited much from the expected boost to their competitiveness.

“And there has to be a suspicion that fears of the damage that could be done by a poorly negotiated Brexit are beginning to weigh heavily upon our makers.”

The dominant services sector also remained just above the long-term growth trend, despite falling by 0.1 points to a reading of 100.2.

The index also shows inflation is at its highest level since December 2012, suggesting it may be some time before price pressures pass through completely.

Read more: UK manufacturers to struggle to recover hard Brexit export hit says report

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