Manufacturing sector 'set for mini-revival'

The UK's battered manufacturing sector is set for a mini-revival when the economy recovers, a leading City economist has forecast.

Roger Bootle, economic adviser to Deloitte and managing director of Capital Economics, set out a vision for the UK economy after the recession and the credit crunch, with predictions for a resurgent manufacturing industry.

In the latest Deloitte Economic Review, Bootle said the manufacturing industry could see its share of the economy grow temporarily from 11 percent to 13 percent, while the stricken finance sector's contribution will drop from 8 percent to 5 percent after the credit crisis brought it to its knees. 

But Bootle said the recovery was not set to come until after 2010, when he expects the economy to continuing contracting, in sharp contrast to Alistair Darling's hopes for 1.25 percent growth next year as stated in his recent Budget. 

The economy will shrink by around 4 percent this year and will contract by another 1 percent in 2010, according to Bootle.
He said a period of deflation was a high risk, despite the recent inflationary pressures from the weak pound, which has seen some prices rise as firms seek to offset higher import costs.

The UK economy would also emerge very different when it recovers from the recession, he added.

"The economy over the next 10 years will look significantly different to the economy of the last 10 years," Bootle said. "After a prolonged period during which consumer spending growth outpaced overall GDP growth, I expect now to see a decade where consumer spending underperforms.

"Meanwhile the Government will have to cut, or at least freeze, its spending in real terms for several years in order to reduce its sky-high borrowing levels."

The "stars of the show" will be sectors such as manufacturing, in spite of fears that it has shrunk too much, he said he believed. UK manufacturers have suffered badly amid the recession, with demand falling to levels not seen for nearly 30 years.

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