Osborne’s makers aren’t marching

Britain's manufacturing industry continues to disappoint despite the chancellor's efforts to get the makers moving.

16-1-14-Osborne-634

Britain's manufacturing sector is stalling

The latest industrial production and manufacturing figures were "unambiguously rubbish", as Michael Hewson of CMC Markets put it. Industrial production (manufacturing, mining and energy supply) fell by 0.7% in November, the worst monthly fall in two years. Unusually warm weather dented electricity and gas output. Manufacturing output fared little better, declining by 0.4%. It has been treading water for a year. Industrial production is still 9.1% below the 2008 peak; factory output, 6.1%. Sterling sank to a five-year low under $1.44 against the dollar.

What the commentators said

Factors such as a strong pound over the last few years, a slowdown in China and emerging markets, the euro crisis and general market volatility aren't the chancellor's fault. But "it's the Tories" who are fuelling uncertainty and deterring investment through the EU referendum, and they have yet to tackle permanent obstacles for the sector, including skill shortages, restricted access to finance and comparatively high electricity costs.

The factory data, along with recent releases signalling slower growth, has fuelled the belief that interest rates will now stay lower for even longer, said Peter Spence in The Daily Telegraph. JP Morgan, one of the last banks to believe that the Bank of England would hike in the first half of the year, has now pushed its forecast for the first rise back to November.

This is the key reason sterling has weakened, but hardly the only one. The latest slump in the oil price implies that inflation, currently hovering around zero, is not likely to take off anytime soon, another reason to think the bank is in no hurry to tighten.

"Britain's hefty current-account deficit makes it one of the most vulnerable major currencies when market sentiment sours," added Jemima Kelly on Reuters.com, while the Brexit referendum is also moving centre stage. The uncertainty looks set to deter investment flows into the UK, leaving sterling exposed, Morgan Stanley's Ian Stannard told Bloomberg.com. Deutsche Bank thinks sterling could fall by another 15% against the greenback by the end of 2016.

Recommended

House prices: from boom to even bigger boom
House prices

House prices: from boom to even bigger boom

UK house prices have risen to new to record highs, says Nicole Garcia Merida. Demand continues to outpace supply, but continued low interest rates, th…
9 Apr 2021
1 April 1999: The minimum wage is introduced in Britain
This day in history

1 April 1999: The minimum wage is introduced in Britain

On this day in 1999, the national minimum wage was introduced in Britain, bringing an instant pay rise to 1.9 million low-paid workers.
1 Apr 2021
How the vaccine wars will harm us all
Global Economy

How the vaccine wars will harm us all

Grabbing and hoarding vaccine supplies, or even manufacturing one’s own, might seem to make sense for a state in an emergency. But the damage done to …
27 Mar 2021
House price rise slows – but not by much
House prices

House price rise slows – but not by much

The rate of increase in UK house prices slowed in the year to January. But nothing seems able to halt their determined march higher, says Nicole Garci…
26 Mar 2021

Most Popular

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021
Nuclear power might never be popular – but now looks a good time to invest
Commodities

Nuclear power might never be popular – but now looks a good time to invest

Nuclear power gets a very bad press, but it is the ultimate renewable energy source. Interest in it is perking up again, says John Stepek. Which means…
9 Apr 2021
How to find companies that can thrive in the post-Covid world
Advertisement Feature

How to find companies that can thrive in the post-Covid world

Many sectors of the global economy will return to something resembling pre-pandemic status, but others will take far longer to recover.
8 Apr 2021