Manufacturing revival led by UK but EU is still in reverse
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.”