Last week was something of a mixed bag of news for the manufacturing sector, bringing both good and bad tidings for the coming year. While more vehicles are expected to be registered in the UK this year than have been seen since 2008, many other areas of the industry are feeling an increasing pinch as cheaper foreign imports flood the market and consumers cutting back on all but essentials constrict revenues still further.
According to the Office of National Statistics (ONS), a drop of 1.3 per cent occurred in factory output during October, which was much steeper than expected and has therefore led to fears of the UK slipping once more into recession. Furthermore, industrial production in the wider context fell by 0.8 per cent, although maintenance work on the North Sea oil rigs contributed to this by triggering a record dip in oil extraction.
The ONS also released worrying figures regarding Britain’s export market as they showed that the trade deficit widened once more in October, from £8.4 billion in September to £9.5 billion by the end of the month. This means that Britain is importing significantly more products than it exports – a problem for a country teetering on the brink of further economic difficulties.
A drop of 1 per cent in exports was the primary cause of this, dealing a harsh blow to finance ministers hoping for an increase in interest for British made products on the international market.
Trade in British goods has declined significantly in many European countries such as Germany, Italy and Spain over the year, totalling a fall of 10 per cent overall. This is largely due to the Eurozone crisis, with many of our European neighbours wary of importing products that could cause further instability in their fragile economies.
However, the Eurozone crisis has provided some good news for those on UK soil, as international buyers are becoming increasingly reliant on British goods rather than relying on the unstable markets in central Europe.
Since this time last year exports to China have grown by 7.6 per cent, while the United States has increased its British made imports by 6.3 per cent. While Britain is by no means economically stable, not being tied to a common currency has allowed for a greater fluctuation in exchange rates and a certain degree of reliability within the manufacturing industry.
Chief economist at Markit, Chris Williamson, says; “Judging by the official data that we have seen for the fourth quarter so far, notably retail sales, trade and industrial production, the UK will struggle to avoid a renewed downturn in the economy after the brief return to growth seen in the third quarter.
“While a dip back into contraction may prove mild and short lived, the concern is that any new downturn will not only put further pressure on the UK’s AAA credit rating but will also provide a further setback to a much needed improvement in business and consumer confidence.”
With consumers unwilling to spend and the Eurozone crisis dampening the trade with close neighbours, it seems that the UK is set to become increasingly reliant on international exports. Unfortunately, should the AAA credit rating drop as a result of a triple dip recession, this country may find itself in a worse situation than was seen even at the height of the earlier financial crisis.
How do you think consumers could be encouraged to spend, thus returning the retail and manufacturing industries to the growth the UK so desperately needs? Do you believe a drop in Britain’s credit rating would have a detrimental effect upon international trade, or will this country remain the European country of choice when it comes to exports?
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