UK manufacturing slump drags down GDP growth, official figures show

The sector contracted by 0.3 per cent in the month, with a poor performance by the car industry and pharmaceuticals highlighted by the Office for National Statistics

Ben Chu
Economics Editor
Friday 11 January 2019 10:40
Brexit: What will happen in 2019?

Manufacturing output fell for a fifth straight month in November, helping to drag the rate of GDP growth down to just 0.3 per cent.

The Office for National Statistics (ONS) reported that the sector contracted by 0.3 per cent in the month, with poor performances by the car industry and pharmaceuticals highlighted.

Construction grew by 0.6 per cent and services by 0.3 per cent in the month, strengthening slightly from October.

However, the quarterly rate of GDP growth fell to 0.3 per cent, the weakest in six months.

Analysts expect overall growth in the final quarter of 2018 to collapse to 0.2 per cent or 0.1 per cent, down from the 0.6 per cent expansion recorded in the third quarter.

“It is possible that growth will slow further in Q1 as that is presumably when the Brexit uncertainty will be greatest,” said Paul Dales of Capital Economics. “What happens next depends on Brexit.”

Mike Jakeman of PwC said: “The clear loss of momentum in the UK economy since the summer is as expected, given the ongoing lack of clarity on Brexit.

“For as long as this remains unclear, businesses will continue to defer major investment plans and households will reconsider making big-ticket purchases.”

The most recent survey of manufacturers showed a pick-up in activity in December, but this was driven by stock-building by firms ahead of a possible no-deal Brexit in March.

Fifth month of contraction

Separately on Friday, the ONS reported that the goods trade balance in the three months to November came in at £34.6bn, broadly similar to the previous three months.

Goods exports were up 1.7 per cent and imports 1.1 per cent higher.

The UK car industry announced a slew of redundancies this week, with Jaguar Land Rover announcing 4,500 cuts, predominantly in the UK, and Ford reducing staff across Europe.

And Honda announced it will pause production at its Swindon plant in April in anticipation of possible border disruption on 29 March.

The ONS said there was a 4.3 per cent fall in the production of motor vehicles, trailers and semi-trailers in November. The sector has been hit by Brexit uncertainty but also the China slowdown and the slump in diesel vehicle demand.

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