Hi-tech slump dashes manufacturing fortunes

The Office of National Statistics (ONS) has revealed figures showing that manufacturing output is at its lowest since 1994 – despite widespread predictions that the industry would rebound in the last quarter.

The manufacturing industry continues to baffle analyst's predictions as the downturn in tech sales was fingered for the disparity. However, the fluctuating fortunes of manufacturers has confirmed suspicions that the Bank of England will not now need to raise interest rates. Many had predicted an interest rise to cool an overheating retail economy.

The ONS figures showed manufacturing output was down 0.4 per cent on December's figure, representing a 6.1 per cent drop for the same period last year. However, the ONS stressed that output would have risen on the whole if it had not been for the slump in electrical equipment.

Re-adjusting to the figures, a leading industry think-tank, the National Institute of Economic and Social Research, downgraded its estimate for growth of Britain's gross domestic product to 0.1 per cent for the last quarter.

Ian Fletcher, Chief Economist at the British Chambers of Commerce, said: "On the surface these figures show yet another low for manufacturers, but underneath there are signs that the turnaround may already be underway."

Mr Fletcher referred to an interview Chancellor Gordon Brown gave to The Times stating that the next budget would champion small businesses. Mr Brown said: "I am committed to further reducing the corporate tax burden on small business, and in my pre-budget consultation I am examining measures to achieve this."

However, Mr Fletcher warned the Chancellor that, while taxation benefits for businesses would be welcomed by its 135,000 members, the "long-term health of the sector will depend on investment and productivity".

The Trades Union Congress has also shown growing alarm at the plight of industry and it issued a call for a long-term strategy to improve prospects for manufacturers.

The union's General Secretary, John Monks, said: "The latest figures on manufacturing output show no signs of recovery. In the short term, it is crucially important that the budget sends a positive signal of support to the manufacturing sector."

On a day of mixed fortunes for the economy, the ONS revealed that the trade deficit had come down from £2.1 billion to £1.6 billion in January.

(GMcG)