LONDON (Reuters) - British industrial output shrank at its fastest pace since 1981 in January, confounding policymakers’ hopes that exporters would get an early boost from weaker sterling and coming on top of bad news for retail.

In this file picture, a worker inspects the spinning machines at a textiles company, May 20, 2008. REUTERS/Sarah Marsh

Industrial production, which makes up 18 percent of the British economy, fell 2.6 percent in January alone and is down 11.4 percent on a year ago, Tuesday’s data from the Office for National Statistics showed.

Total production is now at its lowest since April 1993 after particularly sharp declines in the production of cars, machinery and electrical equipment.

The numbers are just the latest showing factory production lines all around the world have come to a halt, with French figures released earlier in the day showing a record 13.8 percent annual drop in industrial output.

“The industrial sector is suffering a real hammering globally, and UK manufacturers are taking their fair share of the hits,” said Howard Archer, chief UK economist at IHS Global Insight.

None of this bodes well for the Bank of England’s hope that sterling’s 20 percent fall in the last three months of 2008 would spur exports.

There is little support from retail either. The British Retail Consortium reported that like-for-like sales were down 1.8 percent year-on-year in February after severely cold weather and the end of post-Christmas discounts.

“These numbers continue to be weaker than those reported in the official retail sales statistics. That’s because Internet sales continue to be extremely strong so ... consumer spending should remain one of the less weak parts of the UK economy,” said Neville Hill, director of European economics at Credit Suisse.

The housing market also maintained its downward course. The Royal Institute of Chartered Surveyors reported that average home sales per surveyor fell to 9.5 in the three months to February, its lowest since the series started in 1978, and its house price balance sank to -78.3 from -76.6.

STEEP RECESSION

Britain entered recession last year for the first time since the early 1990s, and GDP shrank at its fastest pace since 1980 in the last three months of 2008.

“It’s bad,” said George Buckley, chief UK economist at Deutsche Bank. “This is very much part of a global downturn.”

Manufacturing output, which accounts for around 14 percent of the economy and excludes energy and utilities, fell by 2.9 percent in January against forecasts for a 1.4 percent fall. This brought an annual drop of 12.8 percent, also the steepest decline since January 1981.

In the three months to January compared with the previous three months, factory output fell by 6.4 percent, its biggest drop since records began in 1968.

“This horrific outcome points to another chunky subtraction from overall GDP during Q1,” said Alan Clarke at BNP Paribas.

But analysts said the much weaker than expected figures would have little impact on monetary policy as the Bank of England has already cut interest rates to a record low of 0.5 percent and is starting an aggressive programme of quantitative easing.

The ONS said 12 out of 13 manufacturing sectors recorded declines in the three months to January, with especially significant falls in transport equipment, basic metals and metal products, machinery and equipment, and chemicals and man-made fibres.

The only sector which increased output was coke, refined petrol and nuclear fuel, which expanded by 4.2 percent.