Forties pipeline shutdown knocks industrial output

UK trade gap also worsens, but manufacturers see continued growth

shutdown of the North Sea Forties pipeline at the end of 2017 has sparked a bigger than expected fall in the UK’S rate of industrial output at the end of last year, new figures out yesterday showed.

A decline of 1.3 per cent month-on-month for industrial production in December was the fastest drop recorded by the Office for National Statistics (ONS) since September 2012.

The slump came after the Forties pipeline, which pumps about 450,000 barrels of oil per day, was shut for about three weeks in December when a crack was discovered.

Meanwhile, in a day of mixed data for the UK economy, the ONS revealed continued growth in manufacturing and a surge in construction in December, but a worsening trade deficit with the rest of the world.

Britain’s manufacturers, which form part of industrisetting al output, saw output rise 0.3 per cent in December, marking the eighth consecutive month of growth – the longest positive run in almost three decades. Construction output rose an unexpectedly strong 1.6 per cent.

However, it was a worsening picture on the total UK trade deficit, which swelled by £1.2bn to £4.9bn monthon-month. The goods deficit increased to £13.6bn from £12.5bn in November, higher than analysts’ forecasts.

Senior ONS statistician Ole Black said: “The headline trade deficit widened in the fourth quarter with the impact of increased oil exports accentuated by rising crude prices.”

Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said: “The sharp deterioration in the UK’S net trade position in December was disappointing and means that trade is likely to have been a drag on UK growth in the final quarter of the year.

“This deterioration reflects a significant increase in imports in the quarter, more than offthe the rise in exports.

“Although there was a surprise pick-up in construction output, the sector remains a concern and together with the widening in the UK’S trade deficit and weakening industrial output indicates that economic conditions are becoming more sluggish.

“While many exporters are benefiting from stronger growth in key trading markets, imports continue to grow at a solid pace with businesses continuing to report little in the way of import substitution despite their high cost.

“If this trend continues as we expect, the contribution of net trade to UK GDP growth over the near term is likely to be limited at best.”

Chris Williamson at the IHS Markit consultancy said he believed the better manufacturing figures – accounting for about 11 per cent of GDP – were due to “factories buoyed by the weaker exchange rate”.

The latest data comes after the Bank of England warned this week that interest rates may have to be hiked more aggressively than previously thought in order to control inflation.

mflanagan@scotsman.com