Has a bad year for Britain’s manufacturers come to an end? It seems that way from the latest industry survey.
Output expanded in September at the same rate seen this time last year and the sector has started adding jobs. This follows a slump between January and August when firms were shedding jobs at an alarming rate, especially for an industry that has yet to recover the levels of output it enjoyed before the 2008 banking crash.
A closer look at the Markit/Cips index of activity shows that most subsectors expanded after a broad-based jump in domestic demand. And exports rose on the back of the recent 10% fall in the value of sterling. That all bodes well for a balanced recovery. It also takes the pressure off the Bank of England, which can set aside plans for a further interest rate cut.
But few analysts expect the manufacturing sector to recapture the glory days of 2014 – the brief period when factory output growth appeared to have gained some much-needed momentum.
The slowdown in China’s manufacturing between the summer of 2013 and this summer, which hit global trade, was the first blow before the Brexit vote added a twist of anxiety.
Official figures are also gloomier, showing the manufacturing sector doing no more than bouncing back from a recession. Worse, the pharmaceuticals industry, once a star performer and singled out by the previous government as a key to making Britain great again, has suffered a sharp decline.
Even Theresa May’s comments that she will trigger article 50 and the official Brexit talks in March is a silver lining with a dark cloud attached. The continued slide in the currency, boosting British exports abroad, is the silver lining. The dark cloud can be seen in the shape of a stumbling European economy, wounded by potentially fractious Brexit negotiations. It is a scenario that frightens businesses and the government.
With British business in such a febrile state, it falls to Philip Hammond to provide a degree of security. The chancellor has been clear that business and consumer confidence could suffer during the long Brexit process. Hopefully the autumn statement will outline how he plans to intervene, providing more than warm words and platitudes that generate only more anxiety.
