UK manufacturing faces major difficulties

5th December 2012

Manufacturing output for 2012: -1.

3% on the month, -2.1% on the year Commenting on the manufacturing output figures for October 2012, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: "The decline in manufacturing was much larger than expected. The wider industrial production figures were also bleak, with a decline of 0.8% instead of the increase that was anticipated. The new data increases the risk that GDP will record a decline in the fourth quarter of the year. In our recent forecast, we predicted that manufacturing output would see a decline of 1.1% in 2012 as a whole. However unless there is significant rebound in the final two months of the year, the fall could be even larger. -Although we should not focus too much on one month's figures, it is clear that the manufacturing sector is facing major obstacles to a sustainable recovery. However there is no justification for pessimism. Manufacturing is still a significant sector of our economy and is still benefitting from a competitive exchange rate, not withstanding sterling's rise over the past year. Weak growth in world trade will limit the scope for significant rises in manufacturing exports, but the sector is well-managed, and has the potential to recover. Crucially, many manufacturing firms have been able to maintain their skill bases during the recession. -Clearly manufacturers have to adjust to a difficult reality of weaker growth prospects, but British businesses have the will and the ability to make progress if given the right support. While continuing to reduce the deficit, the government must provide firms with the confidence to invest and grow to ensure that our economic recovery is sustainable over the long term.