General Election 2015: Blow to Conservatives as march of the manufacturers hits the wall
The construction industry slid back into recession and the UK’s dominant services sector slowed sharply
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Your support makes all the difference.George Osborne has been dealt a blow as evidence of the worst month for British manufacturers in more than two years emerged just days before the election.
The Chancellor famously heralded the “march of the makers” in his 2011 Budget, months before the intensifying eurozone debt crisis threw the sector back into reverse.
Since then, manufacturers – accounting for around 10 per cent of the economy – have managed two years of growth, although output remains more than 3 per cent below its pre-crisis peak in 2008.
But the closely watched activity index from the Chartered Institute of Procurement and Supply (Cips) – where a score over 50 signals growth – dealt a blow to the fragile recovery as its reading sank from 54 to 51.9. That was far worse than expected and the biggest monthly drop since February 2013.
Signs of economic sluggishness come at the worst possible time for the Conservatives, who are basing their campaign on the UK’s recovery.
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The Cips snapshot comes days after Office for National Statistics estimates showed the economy’s growth overall halving to just 0.3 per cent – much lower than expected – as the construction industry slid back into recession and the UK’s dominant services sector slowed sharply.
The Cips blamed the stronger pound for hitting export orders from the eurozone, the UK’s biggest trading partner – leaving companies much more reliant on domestic orders to fuel activity. Despite recent weakness, the pound is still up 5 per cent against the euro this year. Worryingly for the UK’s recent jobs recovery, with almost 250,000 jobs added in the quarter to February, hiring was also at its weakest since June 2013.
Rob Dobson, senior economist at the survey compiler Markit, said: “Rates of expansion in production and order books both slowed sharply in April, meaning manufacturing is again unlikely to provide much of a boost to broader economic growth. A slowing global economy and strong sterling-euro exchange rate are hurting the competitiveness of exporters.
“Any signs of rebalancing the economy towards manufacturing and exports remain frustratingly elusive.”
ING economist James Knightley said the data reinforced expectations that interest rates will stay on hold well into next year.”
There was better news for the Chancellor in figures from the Bank of England, which revealed increased business confidence and consumers stepping up borrowing in March. Consumer credit grew by £1.24bn, the biggest rise over a single month since February 2008, while lending to business in March jumped £2.7bn in the largest monthly rise since the Bank’s records began in mid-2011. The news offset weaker mortgage lending as home loans dropped slightly to 61,341 from 61,523 in February.
Howard Archer, economist at IHS Global Insight, said: “The pick-up in bank lending to businesses in March supports hopes that the UK economy is still well placed for decent growth, and fuels suspicion that recent weaker data primarily reflects increased caution ahead of the uncertain election. The jump in unsecured credit ... suggests that consumers are still pretty confident about life, although it may fuel concern that they will pile up debt again to fund spending.”
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