POLITICS

UK Manufacturing Sees Slowest Growth In Over A Year

01/09/2014 11:30 BST | Updated 01/09/2014 12:59 BST
Matthew Horwood via Getty Images
PORT TALBOT, WALES - MARCH 25: Chancellor George Osborne during a visit to Tata Steel to see how it has been affected by the budget on March 25, 2014 in Port Talbot, Wales. In the Chancellor's budget statement last week he announced support for energy intensive manufacturing, Tata's Port Talbot factory is the largest steel plant in the UK, producing five million tonnes of steel annually and employs over 4,000 people. (Photo by Matthew Horwood - WPA Pool / Getty Images)

British manufacturers were "walking rather than running" in August as new figures today showed the sector endured its worst performance in 14 months.

The sluggish growth comes after George Osborne promised in 2011 to kick off a "march of the makers" thanks to the government's raft pf measures to help Britain's manufacturing sector.

Amid fears that geopolitical tensions are hampering the recovery, the closely-watched CIPS/Markit purchasing managers' index survey today gave a weaker-than-expected reading of 52.5, down from 54.8 a month earlier.

The figure is still well above the 50 threshold indicating growth but the overall survey paints a picture of a broad slowdown, with inflows of new business and new export orders weakening and the pace of job creation also easing.

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Markit senior economist Rob Dobson said it was increasingly evident that UK industry was not immune to the impact of the conflict between Ukraine and Russia on the UK's biggest trading partner.

He said: "It is noticeable that where export orders were reported to have risen, companies mainly linked this to demand from North America, Asia and the Middle East, as opposed to our European partners."

The downbeat survey will also give Bank of England policymakers more food for thought this week as they consider whether to raise interest rates for the first time in more than five years.

CIPS chief executive David Noble noted that growth in output, new orders and employment all reduced to a more pedestrian level.

He said: "UK manufacturers were walking rather than running in August as the sector's performance fell to a 14-month low and growth began to slow further."

However, another study found potential for optimism as firms remained confident about the economic outlook despite growth easing to more moderate levels.

A survey of almost 300 companies by the EEF manufacturers' organisation revealed a continued positive picture with ongoing plans to invest in machinery and recruit skilled employees.

EEF chief economist Lee Hopley said: "Manufacturers are still on course for a strong year of output growth in 2014, but our survey points to a moderation in the pace of expansion from the take-off seen in activity over the past year.

"We're also seeing manufacturers continue to recruit for skilled jobs and increase their plans to invest in the coming year, exactly what the UK economy still needs for balanced growth."

Tom Lawton, head of manufacturing at accountancy fim BDO, which helped with the report, added: "UK manufacturing cannot insulate itself from global market conditions and this is clearly shown in the dip in output.

"However, growth remains positive and long term investment and employment intentions feel much realistic at these levels."

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