George Osborne came under increasing pressure today to change course ahead of his autumn half-year budget statement on Wednesday after new figures showed UK manufacturing continues to decline.
The monthly Markit/CIPS survey of purchasing managers in the manufacturing industry found any possibility of recovery remains sluggish following the nine straight months of recession.
According to the survey:
“Demand from the domestic market remained subdued, while the level of new export orders continued to deteriorate.”
Companies reported weaker inflows of new business from clients operating in Europe and the US.
As the graph above shows, the manufacturing activity index rose from 47.3 in October to 49.1 in November, higher than many experts predicted; however, the index was below the 50 mark – the point which separates expansion from contraction in the economy – for the seventh consecutive month.
There was also not much joy for manufacturing workers with companies remaining reluctant to hire.
The report stated:
“November saw companies maintain a cost-cautious approach to hiring, purchasing and stock holding. Job losses were reported for the fourth month running, with the rate of reduction accelerating slightly since October.”
Britain has officially suffered two recessions over the past four years, despite the Bank of England slashing interest rates to a record low of 0.5 per cent and £375 billion of quantitative easing – equal to around a quarter of GDP.
And according to the Institute For Fiscal Studies (IFS), most independent forecasters expect the economy to shrink this year, grow by no more than 1% next year, and by 1.5-2% between 2014 and 2016.
“Every monetary lever that could be pulled has been to try to revive the UK’s ailing manufacturing sector: sterling has been devalued, interest rates kept low, and there’s been £325bn of quantitative easing. So why does manufacturing continue to decline?”
Fisher slammed governments of the past 30 years for lacking an industrial strategy.
“The neglect is so severe that the UK trails gets a lower proportion of GDP from manufacturing than any other G7 nation.”
Professor Roger Seifert, meanwhile, put the blame of the current mess on an obsession with “Thatcherite” economics.
“The economic model that still dominates the government and City of London thinking is the Thatcher revolution which is when finance capital took control of key positions in the economy and coloured the outlook for a generation of political leaders across the board.”
Seifert also cast doubt on the chancellor’s plans for recovery, adding:
“There is no evidence that current policies, even if slightly relaxed by the chancellor, will encourage investment in manufacturing and relevant skills - and that the current set of fiscal and monetary policies will dent the grip of the City of London on finance capital and in turn that the cold hand of finance will help release the funds held by corporations into the innovation and new businesses needed to restore growth.”
Predicting a bad set of results, the chancellor attempted to appear an advocate of the squeezed middle yesterday, telling the BBC’s Andrew Marr he would clamp down on tax avoidance at the top but also freeze benefits at the bottom:
“They’ll be extra investment in the Inland Revenue to tackle tax avoidance by multi-national companies.”
But he refused to change course on implementing austerity, adding:
“To turn back now… would be a complete disaster for the country. If we keep our taxes less competitive then we risk more business staying out of Britain.”