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Manufacturing sector strong in spring

06/07/2007

Britain's production industries enjoyed a strong performance in productivity this spring.

New figures from the Office for National Statistics (ONS) show that output for the UK's production industries rose by a seasonally adjusted 0.3 per cent in the three months to May on the preceding quarter.

The mining and quarry sector did especially well, growing by 1.3 per cent, but output among the electricity, gas and water supply industries fell by 0.9 per cent.

Despite the positive results many in British manufacturing remain concerned by the current economic situation.

Rising interest rates, at a six-year high after yesterday's decision to raise the base rate to 5.75 per cent, are pushing up both input and output costs.

Meanwhile the pound's current performance against the dollar, currently above $2, is deterring foreign firms from buying British products.

Howard Archer of research firm Global Insight said today's figures showed "encouraging resilience" in the face of these headwinds but said the situation was likely to get even more difficult in the second half of the year.

"The pressure on manufacturers is growing," he said.

"Any moderation in demand over the coming months will… limit manufacturers' ability to raise prices to boost their margins, although this is something the Bank of England is keen to see."

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