Manufacturing rally lifts hopes of avoiding triple-dip


British manufacturers shrugged off the snow in January and fewer firms are going bust, raising hopes today that the UK is avoiding a dreaded triple-dip recession.

Manufacturers, one of the culprits behind Britain’s shock 0.3% decline in the final three months of 2012, managed their second successive month of growth as a stronger showing at home offset a further fall in export orders, according to the Chartered Institute of Purchasing & Supply.

Official insolvency figures also showed the lowest number of firms going bust for more than four years, helped by rock-bottom interest rates and support from lenders. There were 3834 company failures in the final three months of last year, down 3.3% on the previous quarter and the lowest since the beginning of the recession in April-June 2008. 

PwC partner Mike Jervis said: “Some commentators have been critical of zombie companies recently, but the survival of such companies is important in maintaining employment and their failure would have enormous knock-on impacts on their suppliers, employees and landlords.”

The better news came as insolvency specialists Begbies Traynor reported a 12% fall in the number of firms in financial distress at the end of last year.

Despite the failure of High Street names like HMV, sectors such as construction and property are in better health, Begbies said. Optimism is coursing through stock markets with the FTSE 100 seeing its biggest January rise in 24 years and making further gains today.

Despite the surprise slide for the UK economy, leaving some experts questioning the validity of the Office for National Statistics’ figures, the Bank of England is expected to hold fire on further money printing next week.

Investec chief economist Philip Shaw said: “Sterling has fallen around 3% since the start of the year, which the monetary policy committee is going to have to build into its inflation forecasts, so we’re unlikely to see any moves.”