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UK Manufacturing Boosted by Food and Drink.

There’s been no shortage of horror stories surrounding the UK’s manufacturing industry these last few months. Fears over the UK’s potential exit of Europe, a burgeoning global financial recession and slowdowns in both China and Europe have all conspired to pull UK manufacturing into negative growth for the first time in three years. With that said, it’s not all bad news for the industry, as the food and drink sector have seen a very solid May.

Britain’s manufacturing output enjoyed a pick up this month, thanks largely to the return of food and drink production after many big businesses were hit during the flooding earlier this year. A CBI poll of manufacturers suggested that orders have improved in recent weeks, especially from within the domestic market, bringing some brief respite to a sector which has been hit hard over the last year. However, the Bank of England recently warned that economic growth could slow further in the second quarter.

It also comes at a time when both sides of the EU debate are using the flagging UK manufacturing sector as something of a political weapon. The leave side suggest that the struggling sector has been hit by poor EU regulation, whilst the stay side say that the uncertainty surrounding our exit has caused businesses to withdraw support to English businesses.

The CBI said that if you exclude the food and drink sector from the survey results, manufacturing output had changed little over the last quarter. The survey also asked factors about their order books, finding that 16% of businesses reported an increase in total orders whilst 24% saw a decrease. That’s a net of -8%, which, whilst poor, represents an improvement over the -11% seen in April.

The CBI’s director of economics, Rain Newton-Smith said “Conditions in the manufacturing sector seem to be a little better overall, with improving order books compared with a couple of months ago. But domestic and global uncertainty remains high, alongside lacklustre export demand,”

That’s not a view shared by all economists, however. Samuel Tombs, chief UK economist at Pantheon Macroeconomics said “Sterling will appreciate and export orders will fall if, as we expect, the UK votes to remain in the EU in June, meanwhile, domestic demand for manufactured goods likely will grow at a more gradual pace than in recent years as growth in consumers’ real income slows in response to rising inflation and intensifying austerity.”

All in all, it seems like we’re entering a period of mixed fortunes for the manufacturing sector. The steel sector continues to struggle amid a number of factors, but retail sales figures have bounced back slightly and a rise in employment has meant we’ve hit a record levels. It might take some months for the true picture to arise, but from this position, some green shoots are certainly visible.

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