British factory output slumped in November at its fastest annual pace since 1981, increasing the likelihood that the economy shrank sharply at the end of 2008 and faces a deep recession in 2009.
The Office for National Statistics said today manufacturing output was 7.4 per cent lower than a year earlier, its biggest fall since June 1981 when Britain was in the throes of an industrial meltdown that decimated its car industry and coal mines.
Production was down 2.9 per cent in November alone, the biggest monthly fall since one-off plant closures for Queen Elizabeth's jubilee in the summer of 2002.
Falls were driven by reductions in paper and printing, transport equipment and metal production.
Sterling and Britain's top share index fell after the figures added to growing expectations that Britain faces a lengthy recession and that Bank of England interest rates, currently at 1.5 per cent, could
near zero soon.
The broader industrial output measure, which includes North Sea oil production and power generation as well as factory output, dropped 2.3 per cent on the month for a 6.9 per cent annual fall. That annual rate was the weakest since March 1981.
“These numbers are even worse than we expected and twice as bad as October,” said Philip Shaw, chief economist at Investec.
“We had already revised our gross domestic product (GDP) forecast for the fourth quarter down to -1.4 per cent and -2.0 per cent for 2009. We may have to take another look at that and push the numbers lower.”
The only bright spot was a sharp fall in firms' inventories, which Mr Shaw said put a cap on how fast output could fall in coming months.
Nonetheless, bad news for British manufacturing has continued since November, despite a fall in sterling making exports to the United States and the rest of Europe cheaper.
Reuters