News

November 12, 2010

Manufacturing slump won’t affect economic recovery, say economists

A recent fall in manufacturing output is just a “hiccup” and won’t affect the UK economy’s continued recovery, economists have said, writes Clare Bullock.

Figures from the Office for National Statistics (ONS) revealed that growth in manufacturing output slowed to 0.1 per cent in September, from 0.4 per cent in August.

However, business groups have said that the manufacturing sector continues to play a key role in economic recovery as the service sector struggles.

British Chambers of Commerce (BCC) chief economist, David Kern, said: “The manufacturing figures might have been low because we had two very strong figures in the previous quarters. If you focus on a single disappointing figure, you can come up with any number of reasons for the drop.

“The research shows that manufacturing growth is quite good on an annual basis, and this gives us a much better idea of the trend,” he added. “These figures are a little disappointing, but it hasn’t been a fall, it’s still been a rise – the recovery is still on course. The main concern is how we cope with the fiscal tightening when it takes on a more forceful basis next year.”

The Manufacturing Advisory Service West Midlands chief executive, Simon Griffiths agreed that the fall in output was just a “hiccup”.

“We’ve come out of a deep recession, the manufacturing industry has grown significantly over the last few months, and there is still some caution about a possible double–dip recession,” he said. “There are also concerns about the public sector cuts and how they might affect manufacturing.

“There is not a consistent level of demand coming through, particularly at the smaller end of the market,” added Griffiths. “So if there’s a slight delay in terms of new orders, this kind of hiccup can arise.

“Small firms have to ensure they are in a good position with multiple customers in multiple markets,” he said.

The Bank of England Governor Mervyn King said this week that although the outlook for the UK economy remained uncertain, the recovery was likely to continue.

• To access data on manufacturing output, visit the ONS website
• Economic growth will continue next year, says BCC