UK industry 'is on brink of recession'

UK industry is now on the brink of recession, some experts warn

The UK manufacturing sector is on the brink of recession, it was claimed after official data showed output fell for the fifth consecutive month in July.

The Office for National Statistics (ONS) said manufacturing output dropped 0.2 per cent during the month, marginally worse than the 0.1 per cent drop expected by analysts. The sector's activity was also 1.4 per cent lower compared to a year ago.

Paul Dales of Capital Economics said the sector needed to show growth of 0.7 per cent in both August and September for UK manufacturing to avoid a technical recession, as defined by consecutive quarters of falling output.

He added: "The manufacturing sector is leading the rest of the economy into recession. Overall, this data lends further support to our view that the whole economy will soon enter a recession and contract by around 0.2 per cent next year."

The monthly fall in manufacturing output was driven by a contraction in production of optical and electrical equipment, down 1.3, per cent, the ONS said.

That tallies with evidence from the UK high street of falling sales for electrical goods for retailers such as PC World and Currys.

During the three months to July, the ONS also reported a 2.4 per cent drop in food, drink and tobacco manufacturing output.

Howard Archer, UK economist at Global Insight, said: "Manufacturers are now being hit hard by muted domestic demand, weakening activity in key export markets, elevated energy and commodity prices, and tight credit conditions.

"While the significantly weaker pound is providing a much-needed boost to UK manufacturers, this is being countered by significantly slowing growth in the Eurozone and a stagnant US economy."

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