Brexit vote starts to weigh as industrial output shrinks for third month in a row

INDUSTRIAL OUTPUT shrank for a third month in a row in March, according to official data, underscoring how the impact of last year’s vote to leave the European Union has begun to weigh on the economy.

The Office for National Statistics (ONS) also said Britain’s trade deficit widened by more than expected, a further setback for hopes that the fall in the value of the pound since the Brexit vote would help rebalance the economy.

Industrial output fell by a monthly 0.5 per cent – a sharper decline than expected by economists – and output in February was revised lower.

The manufacturing sector, which is part of overall industrial output, saw output fall by 0.6 per cent, compared with economists’ expectations of no change.

For the first quarter as a whole, industrial output only inched up by 0.1 per cent and manufacturing growth slowed to 0.3 per cent.

Britain’s economy has slowed this year after it initially withstood the shock of the decision by voters to leave the European Union in a referendum in June.

Consumers, the main drivers of growth, have reined in their spending as inflation rises quickly, pushed up by the post-Brexit vote fall in the value of the pound.

Some surveys have suggested that manufacturers started the year well, potentially offsetting some of the slowdown in consumer spending. But that optimism has not yet been reflected in official data. The ONS said the figures implied no change to its preliminary estimate that Britain’s economy grew by 0.3 per cent in the first quarter, less than half the pace of growth at the end of 2016.

Separate data from the ONS showed Britain’s goods trade deficit with the rest of the world widened to £13.44bn.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “March’s figures show the pressure on consumers’ real incomes from rising inflation is beginning to hurt manufacturers.”