British manufacturing shrinks for the first time in three years

UK manufacturing activity contracted in April for the first time in three years, a survey has indicated, adding to fears over the economy’s strength.

The Markit/CIPS survey of purchasing managers fell to 49.2 in April, the lowest level in more than three years and below the key 50 mark that separates expansion from contraction.

The combination of the slump in the oil and gas sector, the strength of sterling and a weaker global outlook has been a drag on the industry for some time.

Markit said a fall in jobs was a knock-on effect of the downturn, with the data showing almost 20,000 job losses over the past three months, mostly among large employers.

Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said: “The sector is grappling with the struggling oil and gas sector, softening domestic demand and weak order outlook from other parts of the world.”

Rob Dobson, Markit’s senior economist, said: “The UK manufacturing PMI fell below its critical 50 mark for the first time in over three years in April, highlighting a further deepening of the sector’s downturn at the start of the second quarter.

“On this evidence, manufacturing production is now falling at a quarterly pace of around 1%, and will likely act as a drag on the economy again during the second quarter and putting greater pressure on the service sector to sustain GDP growth.”

The shock contraction pushed the value of the pound down by as much as one-and-a-half cents against the dollar, to $1.4615.

The pound also fell by more than a cent against the euro, to €1.2641.

The UK economy expanded by 0.4 per cent in the first three months of the year. Analysts believe growth could slow further in the three months to June.

Separately on Tuesday, the European Commission cut its UK growth forecast for the year to 1.8 per cent from the 2.1 per cent it suggested in the winter, saying the risks to the outlook are “tilted to the downside” because of weaker external demand.