More bad news on UK manufacturing

07 Sep 2015, by Geoff Tily in Economics

Today the EEF (Engineering Employers’ Federation) affirmed the weakness of the UK manufacturing sector, halving their forecast for manufacturing growth in 2015 to 0.7 per cent.

The chart below of ONS figures shows manufacturing proceeding since the 1990s in a series of fits and starts. Over the past decade, the very brutal collapse in the global recession that began in 2008, has given way to only a very meagre recovery. The immediate post-crisis gains were halted in the early stages of the last parliament, and then a modest revival has already seemingly petered out since the start of the year. Growth (NB the chart is levels) in 2015 Q1 was only 0.1 per cent, and then Q2 saw a decline of -0.3 per cent. In terms of levels, manufacturing is still 5 per cent below the pre-crisis peak.

Manufacturing output, index 2011=100

The EEF release emphasises how “a ‘rollercoaster of risks’ caused by global economic uncertainty (in Europe, China and Greece) is taking a toll on UK manufacturing. Domestic demand is still positive but weakening, and export orders are at a six year low. “Recruitment and investment plans hang on to positive ground, but confidence for the year ahead again edges down”.

Ms Lee Hopley, Chief Economist at EEF was not entirely downbeat:

“However, it’s important to note that confidence has dipped rather than nose-dived and if the global drag lets up anytime soon then UK manufacturing should very swiftly get back into its previous stride. Industry and Government must continue to work closely together to help offset the risks and support investment and innovation in the sector.”

As an editorial in the Financial Times today emphasises, ‘Britain never lost the knack for making things’.

But the fragility and volatility of the UK and global economies that has been the norm for decades have meant the sector has been relentlessly buffeted by wider macroeconomic conditions.

Moreover the government seems only determined to make it worse.

We already know that severe cuts to government spending will derail any recovery, especially in the wake of disturbances from the global economy. But spending cuts for the new parliament are planned on the same scale as the last. The world economy seems no more stable, indeed at the moment it looks more unstable. Yet austerity politics demands even the lessons of the very recent past be ignored. This seems very far from the “working closely” urged by the EEF to protect industry and those working in this vital sector.