Economy

UK manufacturing and construction sectors contract

Data from the Office for National Statistics as UK economy continues to falter

Britain’s Chancellor of the Exchequer Philip Hammond reacts as he walks in Downing Street in central London . Photograph: Justin Tallis/ Getty

Thu May 11 2017 - 10:51

Britain’s manufacturing and construction sectors contracted in March and the country’s trade deficit widened as the economy continues to falter.

Data from the Office for National Statistics (ONS) showed manufacturing output fell 0.6 per cent in March, construction dipped 0.7 per cent while industrial output as a whole slumped 0.5 per cent, its third straight monthly decline.

The figures, which fell short of expectations, point to a further slowdown in momentum for the UK economy following the country’s decision to quit the EU last year.

To compound matters, the UK’s total trade deficit in goods and services widened by £2.3 billion between February and March to £4.9 billion, contributing nearly half of the quarterly deficit, which also grew by £5.7 billion to £10.5 billion. Sterling slumped on the news, with the pound falling 0.1 per cent to $1.29 .

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Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "March's industrial production figures show that the pressure on consumers' real incomes from rising inflation is beginning to hurt manufacturers.

“Industrial production has fallen for three consecutive months. With households’ real incomes set to come under further pressure from rising inflation, manufacturing output likely will grow only sluggishly ahead.”

The trade figures in particular make for sober reading, with the collapse in the value of the Brexit hit pound failing to provide a significant boost for exporters. “March’s simply dreadful trade figures demonstrate that Britain is failing to capitalise on sterling’s depreciation,” Mr Tombs added.

The industrial production figures were dragged down by a fall in housing repair and maintenance jobs and infrastructure. The largest downward impact on production came from electricity generation, due to warmer than average temperatures. On a quarterly basis, industrial output nudged up by 0.1 per cent and manufacturing growth slowed to 0.3 per cent.

However, the ONS added that the slew of poor figures implied no change to its preliminary estimate that the economy grew 0.3% in the first quarter. The Bank of England is expected to nudge down its growth outlook and keep interest rates on hold later today.

Policymakers on the Bank's Monetary Policy Committee (MPC) are set to keep rates on hold at 0.25 per cent on Thursday following official figures estimating growth more than halved to 0.3 per cent in the first quarter.

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