UK plc sparks slowdown fear

GROWTH prospects were dealt a blow after factory output contracted for the first time in three years in April as an atmosphere of “deep unease” builds across Britain’s manufacturing sector.

Falling export orders and weaker domestic demand for consumer goods heightened fears of a slowdown in growth amid uncertainty over the EU referendum.

For the first time since March 2013, the CIPS/Markit purchasing managers’ manufacturing index fell below the 50-point mark, separating expansion from contraction.

It slipped from 50.7 in March to 49.2, well below forecasts that it would pick up slightly to 51.2.

Output from car plants, such as the one pictured, has been a rare bright spot but a slower oil and gas industry has squeezed factories and the retail sector is faltering – as highlighted by the collapse of BHS.

Economists suggested the estimated 1 per cent quarterly downturn in manufacturing, which contributes about 10 per cent to Gross Domestic Product, could lead to economic growth slowing to 0.3 per cent in the second quarter from 0.4 per cent the previous three months. David Noble, chief executive at the Chartered Institute of Procurement & Supply, said: “An atmosphere of deep unease is building throughout manufacturing, eating away at new orders, reducing British exports and putting more jobs at risk.

“Manufacturing jobs are under pressure, with the sharpest overall decline in employment since February 2013.”

The data showed about 20,000 jobs have been lost over the past three months.

Lee Hopley, chief economist at manufacturers’ organisation EEF, said: “The sharp drop to a three-year low and another month of reported job cuts could be the clearest sign yet that referendum uncertainty is starting to weigh on the real economy.

“However, this is just another straw on the back of a sector already grappling with the struggling oil and gas sector, softening domestic demand and weak order outlook. It will require everything that could go right to come good in the second half if manufacturing is to avoid another year of falling output.”