UK industry shrinks again and heads back into recession

UK industry went back into recession as it shrank for the second quarter in a row, according to the Office for National Statistics (ONS).

Figures released this morning showed that industrial production decreased by 0.4 per cent during the first three months of the year. Manufacturing – the largest component of the category – was also down by 0.4 per cent.

Manufacturing in March was 1.9 per cent lower than a year earlier, the steepest decline since May 2013, and in line with economists’ predictions in a Reuters poll.

In March alone, manufacturing output edged up by 0.1 per cent, slightly less than forecast, after dropping by 0.9 per cent in February.

It is the third time UK industry has been in recession in eight years.

The ONS highlighted in particular the ongoing plight of Britain’s steel industry, with a 4 per cent annual drop in the manufacture of basic metals exerting the biggest drag on the sector.

Steel production alone fell by 37.3 per cent in the year to March.

“There isn’t too much in the data to lift economic spirits as a small increase in manufacturing output in March doesn’t change the picture of an overall weak start to the year,” said Lee Hopley, chief economist at the EEF, the manufacturers’ organisation.

She added that recent surveys pointed to continued weakness in “consumer facing sectors”, including the car industry.

“Whether this proves to be temporary is yet to be seen but UK manufacturers are far from alone in seeing this trend with other data from Europe suggesting that the industrial recovery is far from secure,” she said.

Preliminary data has shown that the UK’s overall economy grew by 0.4 per cent in the first quarter, a slowdown compared to 0.6 per cent in the previous three months.

Financial data company Markit last week predicted the second quarter could be worse, with a growth of 0.1 percent.

If those predictions come true, that would be the weakest quarterly reading since late 2012.

The BoE is expected to keep interest rates on hold when its monthly policy decision is announced on Thursday.