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Comment - tough times ahead for manufacturing PDF Print E-mail
Friday, 11 December 2015

Commenting on the UK’s manufacturing sector, Ana Boata; European Economist, Euler Hermes, said: “Manufacturing output has contracted since Q1 2015 and remains -7% below the Q1 2008 peak. The first Q4 reading does not point to a much better outlook as output contracted by -0.1% year on year in October. Indeed, although above the long-term average since 2014, capacity utilisation rates fell below this level in Q4 2015 (to 80.4 from 82.6).

“Although financing conditions remain accommodative, anticipation of a rise in Bank of England key interest rates in Q2-Q3 2016 is exerting upside pressure on sterling and remains an important drag on competitiveness (notably compared with the Euro).

“The Manufacturing PMI deteriorated in November, but remained in expansionary territory. The survey shows continuing downside pressures on selling prices and this is putting pressure on company turnover and profitability. In contrast, the services sector (80% of value added) is recovering strongly, mainly financial services (+15% above the pre-crisis peak).

“We expect GDP growth will slow to +2.1% in 2016 (+2.4% in 2015) and to +1.9% in 2017. Brexit fears weigh on growth prospects as investment decisions may be delayed by increasing uncertainties.”

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