Factories to fall to lows of recession
British manufacturing could soon sink to levels not seen since the depths of the financial crisis, leading economists have warned.
The latest closely watched Purchasing Managers' Index (PMI) for UK manufacturers is released on Tuesday. The December figures are expected to paint a bleak picture of a sector that still makes up 12 per cent of the UK economy.
Analysts believe the index will at best remain at the 47.6 seen in November. Any figure below 50 represents a contraction. Investec economist Philip Shaw said the new index could fall to as low as 45. That would be the worst reading for the manufacturing sector since early 2009, when Britain was in the grip of recession.
Chris Williamson, the chief economist at PMI publisher Markit, said that British manufacturing will not bounce back in the short-term. "UK manufacturing suffered years of neglect," he said. "It's not a case of hoping export markets will revive so we can tap into that. The whole cultural, educational and infrastructure policy needs to be looked at."
Mr Shaw said that British manufacturing, after a period of strong growth in 2010 on the back of a weak pound, has been hit by a combination of low domestic demand and firms running down their inventories. "De-stocking accentuates the downturn in the traded goods sector. That's why manufacturing tends to suffer more at this stage of the economic cycle," he said.
Another major factor behind Britain's manufacturing weakness is the eurozone crisis, which has seen governments embark on simultaneous spending and tax cuts. A host of PMI estimates from across European economies will be published tomorrow. Last month the combined European index showed activity falling for the fifth successive month to 46.9 and analysts do not expect an improvement.
"Around a half of UK exports go to the eurozone," said Mr Shaw, "and if its banking system is under threat then credit flows in the UK weaken as well because of the generalised tightening of credit conditions."
Ian McKellen and Patrick Stewart bromance continues: X-Men star gushes about 'pussy cat' BFF Patrick Stewart
David Cameron stung by jellyfish: PM hurt after ignoring advice of locals while on holiday
South Korea ferry: Vice principal rescued from sinking ship found hanged
Catherine Deneuve and Sophie Marceau in war of words over President Francois Hollande's affair with Julie Gayet
Inside North Korea with the man who won the marathon
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
US Navy christens huge $3 billion destroyer ship USS Zumwalt that appears as a fishing boat on enemy radar
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
Nigel Farage fatigue? Half of voters ‘immune’ to Ukip’s appeal
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
Refugee facing deportation from Sweden saved by fellow passengers refusing to let plane leave
- 1 KFC 'sorry' after lesbian couple are kicked out of Bath restaurant for 'heavy petting'
- 2 West Ham confirm 20-year-old striker Dylan Tombides has died after battle with cancer
- 3 24 people applied for the 'world's toughest job', here are their interviews
- 4 Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'
- 5 PFA Player of the Year: Luis Suarez, Daniel Sturridge and Steven Gerrard all nominated as Liverpool dominate award shortlist
iJobs Money & Business
£150.00 per week: QA Apprenticeships: This company has been providing on site ...
£221.25 per week: QA Apprenticeships: This company is a well established Inter...
£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...
£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...