Output from Britain’s factories unexpectedly faltered in January, according to official new figures today, amid growing concern that the plunging euro is beginning to hamper UK exports.
Total manufacturing output in January fell by 0.5 per cent compared to December 2014, while the more widely defined total industrial production - which includes power generation and North Sea oil - declined by 0.1 per cent.
However, compared with January 2014, both figures were up, by 1.9 per cent and 1.3 per cent respectively, according to the Office for National Statistics.
The British Chambers of Commerce called the new data disappointing and warned that the recent sharp rises in the pound meant manufacturers were struggling to maintain exports into Europe. The eurozone is by far the biggest export market for Britain.
David Kern, chief economist, said, “While longer-term comparisons still show solid growth of just under 2.0 per cent over the past year, there is little doubt that the manufacturing sector is facing major challenges.”
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The pound soared through the €1.40 mark yesterday, its highest for seven years as the European Central Bank’s quantitative easing policy encouraged currency traders to flee the euro. It continued the rise today, surging to €1.4188, though it drifted lower against the resurgent dollar.
The ONS said the subsectors posting the biggest output falls were computer, electronic and optical products; food, beverages and tobacco; and unclassified machinery and equipment.
Compared with a year earlier, transport equipment, which includes car manufacturing, was the standout winning sector, posting a 6.1 per cent increase in output.
The Treasury was encouraged by the overall production statistics. A Treasury spokesperson said: “Today’s figures show manufacturing output grew by 2.6 per cent in the three months to January compared to a year ago. The UK has seen the fastest growth in the G7 but is not immune to the risks facing the global economy. The job is not yet done and all of the progress we have made will be at risk unless we carry on working through the long term economic plan which is delivering economic security.”
In the three months to January, manufacturing output was 4.8 per cent smaller than in the pre-crisis peak quarter of January to March 2008, the ONS said.
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The Centre for Economics and Business Research called the manufacturing figure “tepid,” blaming the near stagnation in parts of Europe as well as a slowdown in some emerging markets at the end of last year.