Man­u­fac­tur­ing re­vival led by UK but EU is still in re­verse

The Daily Telegraph - Business - - Business - Rus­sell Lynch By

THE UK is lead­ing Europe’s man­u­fac­tur­ing re­vival as in­dus­try springs back into ac­tion after lock­down, new fig­ures show.

Fac­to­ries re­turned to growth in June, ac­cord­ing to a snap­shot of ac­tiv­ity by the Char­tered In­sti­tute for Pro­cure­ment and Sup­ply (Cips), with an in­dex score of 50.1 – above the 50 no-change mark for the first time in four months.

The show­ing was stronger than sur­vey com­piler IHS Markit’s read­ing for euro­zone firms, which are still stuck in con­trac­tion at 47.4 last month. France was the only coun­try in the bloc to reg­is­ter growth, with a score of 52.3.

How­ever, Dun­can Brock of the Cips warned that the June re­cov­ery rep­re­sented sta­bil­i­sa­tion rather than a last­ing bounce after ac­tiv­ity col­lapsed due to the eco­nomic shut­down. The sec­tor is cut­ting thou­sands of jobs – with Air­bus alone this week an­nounc­ing plans to cull 1,700 UK work­ers – while the tax­payer-funded fur­lough scheme for work­ers is due to end in Oc­to­ber.

The sur­vey also sug­gests jobs are be­ing lost at one of the high­est rates in its 29-year his­tory. Econ­o­mists warned last month that the un­em­ploy­ment cri­sis was “only just be­gin­ning” after ben­e­fit claims surged to a record 2.8m.

Mr Brock said: “The sec­tor may be spring­ing back into ac­tion after lock­down eases, but worse re­sults may be on their way as gov­ern­ment sup­port falls away and busi­nesses are left with de­ci­sions to make on whether they can weather any con­tin­u­ing storms.”

Al­though em­ployer con­fi­dence has picked up, ex­port busi­ness fell for the eighth month run­ning as Covid-19 hits trade. Over­seas de­mand dropped de­spite in­creased sales of pro­tec­tive gear, health­care and clean­ing prod­ucts.

Job losses will also fuel fears over long-term eco­nomic scar­ring if ac­tiv­ity re­mains sub­dued after economies around the world re­open.

Is­abel Schn­abel, the Euro­pean Cen­tral Bank’s ex­ec­u­tive board mem­ber, warned this week that “the re­cov­ery won’t be as swift as many had hoped”, de­spite Andy Hal­dane, the Bank of Eng­land chief econ­o­mist, hail­ing signs of a rapid “V-shaped” re­cov­ery.

Credit rat­ing agency Stan­dard & Poor’s cut its fore­casts for UK growth yes­ter­day, pre­dict­ing an 8.1pc slide this year. With an ex­tended EU tran­si­tion now off the ta­ble, it fore­casts the econ­omy will still be 3pc be­low pre-pan­demic lev­els by 2023.

Boris Glass, chief econ­o­mist, said: “The re­turn to pre-pan­demic lev­els of eco­nomic ac­tiv­ity will also be ham­pered by in­evitable dam­age to the struc­ture of the econ­omy.

“Some busi­nesses will have failed, or may fail dur­ing the re­cov­ery phase when de­mand and rev­enue will still be weak.”

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