Recession grips UK as manufacturing output shrinks in January

The year did not start well for British Prime Minister Gordon Brown as British industrial and manufacturing output declined to its worst year since 1931 and fell for 11 straight months in a row in January.

With all signals pointing towards a deeper recession in the UK, the Office for National Statistics (ONS) said on Tuesday that total production output decreased by 5.6 per cent in the latest three-month against the previous three- month period and fell 9.6 per cent against the last three months a year ago.

With the British economy worsening, manufacturers have been struggling as the data showed that manufacturing output decreased by 6.4 per cent in the three months to January 2009 compared with the three months to October 2008.

It was 10.4-per cent lower against the same three month period to January 2008. Output decreased in 12 out of the 13 sub-sectors but increased in the coke, refined petroleum and nuclear fuels sub-sector.

The weak pound against the euro and the dollar did not help UK manufacturers as local demand had just disappeared and exports were marked with low activity due to tight credit facilities.

The most significant decline was in the transport equipment industries, which declined by 10.8 per cent in the latest three-month-on-three-month period, while there was a 11.4 per cent decline in the basic metals and metal products industries and 9.8 per cent in the machinery and equipment industries.

Between December and January, manufacturing output decreased by 2.9 per cent. Output decreased in nine of the 13 sub-sectors and increased in four sub-sectors during the latest month with the most significant decreases in output were 10.0 per cent in the transport equipment industries, 6.1 per cent in the electrical and optical equipment industries and 7.0 per cent in the machinery and equipment industries. The most significant increase was 0.9 per cent in the food, drink and tobacco industries.

In the latest three month period, there was a decrease in output of 3.1 per cent in the mining and quarrying sector and a decrease of 1.0 per cent in the energy supply sector.

Within energy supply, output of the electricity supply industry decreased by 1.4 per cent during the period while the mining and quarrying sector, showed a decline of 1.9 per cent in oil and gas extraction.

The 31-percent decline in the value of the pound aginst the US dollar and 17 per cent against the euro in the past 12 months has not benifitted manufacturing exports.

The car industry in the UK has been among the worst hit  with the world's biggest carmaker, Japan's Toyota, finalising plans for fresh cutbacks in its UK factories.

Economist in the UK were taken aback at these figures as even the gross domestic product (GDP) contracted by 1.5 per cent in the fourth quarter of 2008, unrevised from the previous estimate, although down from a fall 0.7 per cent in the third quarter of 2008 thereby entering into deeper recession. (See: UK economy contracts by 1.5 per cent in Q4)

Commentators say that the emerging trends point to GDP contracting approximately 4 per cent, which would be the worst since 1931, when the country witnessed a fall in GDP by more than 5 per cent and culminated in the Labour government falling followed by a decade of fodd scarcity and widespread unemployment.

As the British economy contracted at the sharpest pace since 1980 in the fourth quarter, joblessness rose to a 10-year high in January. House prices dropped an annual 10 per cent last month, Hometrack Ltd said.

Prime Minister Gordon Brown's government last week instructed Northern Rock, the nationalised mortgage lender, to expand lending by 14 billion pounds and is guaranteeing assets for Royal Bank of Scotland Group Plc to prevent its collapse.