UK Factory Output Grows Despite Fears Of EU Vote Fallout

UK factory output made tentative gains in June after a slump in the spring, but firms still shed jobs amid fears over the referendum vote last week, according to reports by The Guardian.

The survey of manufacturers, which was mostly conducted ahead of the decision to quit the EU, found that most of the gains came from solid growth in new orders, which rose at the fastest pace since last October.

The Markit/CIPS purchasing managers’ index (PMI) increased to 52.1, from a revised reading of 50.4 in May, its highest level since January.

Rob Dobson, senior economist at survey compilers Markit, said the rise in new orders reflected the continuing strength of domestic business with a little support from the export sector, which remained tough.

He said: “With 99% of survey responses received before the end of 23 June, the latest PMI signalled that the manufacturing sector has started to move out of its early year sluggishness in the lead-up to the UK’s EU referendum.”

The PMI also rose to a five-month high on the back of improved rates of expansion in production and a demand for capital goods, which Dobson said was a key bellwether of broader investment spending.

However, he warned that manufacturers, who have yet to regain the level of output before the 2008 crash, remained wary of economic and political developments.

Live FTSE 100 on course for biggest weekly rise since 2011 in Brexit rebound - business live

Markets are up after Mark Carney said the Bank of England could cut interest rates following the Brexit vote.

 “Whether this growth recovery can be sustained will depend heavily on whether the current financial and political volatility spills over to the real economy.

“While the Bank of England remains poised to act if needed and the UK’s trading relationships are unchanged during the two-year negotiation period, there’s a clear risk that ongoing uncertainty will have at least some short-term impact on manufacturing during the coming quarters,” he said.

“The big question is whether any negative impact from uncertainty can be partly offset by a boost to exports resulting from the fall in the pound.”

Surveys of eurozone manufacturers by Markit found that only France continued to struggle as the other 18 members of the currency bloc moved ahead, including Greece.

Credit: The Guardian