Factories feel the heat from strong pound

BRITISH manufacturers have shed jobs for the first time in more than two years as the strong pound, weak demand in Europe and the slowdown in China hit production, according to a report.

The Markit/CIPS index of activity in the sector – where scores above 50 show growth – slipped from 51.9 in July to 51.5 in August. Export orders declined for the fifth month in a row and companies reported job losses for the first time in 26 months as large manufacturers cut staff numbers.

The report blamed reduced overseas demand on the back of the strength of sterling, which pushes up the price of exports, as well as subdued sales to the eurozone and worries about China.

‘The UK manufacturing sector remains in a holding pattern with production growth hovering around the stagnation mark and marginal job losses reported for the first time in 26 months,’ said Rob Dobson at Markit.

Official figures last week showed the economy grew by 0.7pc in the second quarter of the year with services up 0.7pc and construction up 0.2pc but manufacturing down 0.3pc. The malaise in British manufacturing has left the UK facing a ‘two-speed’ recovery with services firms booming while factories strug- gle. David Noble, chief executive of the Chartered Institute of Procurement and Supply), said: ‘The sector was on a go slow trajectory, showing a disappointingly slow pace of growth, raising fears this could be an entrenched situation developing in the next few months.’

Kallum Pickering, senior UK economist at banking group Berenberg, described manufacturing as the ‘Achilles heel’ of the economy.

Martin Beck, economic advisor to the EY Item Club, said UK factories are ‘enduring a real struggle’ as the strong pound and weak demand from China dent demand.