Mobile phones `mania' revives stagnant economy

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BRITAIN'S LOVE affair with mobile phones has helped to pull manufacturing industry out of recession, according to official figures yesterday.

The annoyance of all those tinny tunes on the train as passengers answer their phone calls could be a price worth paying for industrial recovery.

Total manufacturing output was flat in the three months to April, the best it has done since September, according to government statistics. But surging production of mobiles and pagers made up for continuing weakness in other areas of industry. Compared with the same period a year ago, mobile phone output was a staggering 45 per cent higher. It leapt 12.8 per cent in the latest three months, falling back slightly in April from a record March level.

The Office for National Statistics said there had been a sharp upward trend since December in the number of mobiles being made, reflecting surging demand for what has become the latest fashion accessory.

Companies such as Motorola and Ericsson manufacture mobile phone handsets in the UK, partly for the export market. The number of subscribers in Britain has rocketed from about 12 million before Christmas to 15.5 million last month and is growing by nearly 4 per cent a month, according to the Federation of Communications Services. The introduction of pre-paid handsets before Christmas fuelled the boom.

Other parts of British industry are reporting increased production too, including electrical engineering, the car industry and aerospace.

However, some remained in a very subdued state - the output of whisky distilleries fell, as did production of plastics, chemicals, and some of the traditional metal bashing sectors of engineering.

The damage inflicted on exports by the strong pound and on domestic orders by the winter slowdown in the economy has taken manufacturing output 1.3 per cent lower in the year to April.

The Office for National Statistics remained cautious about the outlook, saying production remained on a downward trend. Yet despite the evident weakness, yesterday's statistics were the first to confirm business surveys suggesting that manufacturing is past the worst.

The tentative signs of recovery did not prevent business organisations and unions demanding the Bank of England should cut interest rates again.Ian Peters, deputy director- general of the British Chambers of Commerce, said: "With official data showing a stagnant economy, disappointing retail sales figures and exchange rate pressures forcing manufacturers to cut profit margins to the bone, the Bank must give business a chance to get a grip on recovery and cut interest rates."

City experts reckon the decision is on a knife-edge. Recent signs of recovery in the economy weigh against the continuing strength of the pound. The interest rate announcement is due at noon today. The cost of loans last fell, by a quarter point to 5.25 per cent, in April.

Business outlook, page 19