UK factory output dives to seven-year low on Brexit gloom

UK factories have suffered the sharpest drop in factory output for seven years as anxiety over a no-deal Brexit and the global economy hit the sector hard.

The latest snapshot from IHS Markit and the Chartered Institute of Procurement and Supply showed that activity sank in August to the lowest levels since July 2012. The Independent says the data is “predictably awful”.

In a worse-than-expected reading, it fell to 47.4, down from 48.0 a month earlier. Anything above 50.0 separates economic growth from contraction. The report is influential, as it is closely watched by the Treasury for early warning signals from the UK economy.

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EU-based customers are “shunning British manufacturers as the risk of no-deal Brexit mounts”, The Guardian says, by rerouting supply chains away from the UK.

The survey “highlights the impact the departure from the EU, and the risk of leaving without a transition, is having on the UK economy”, Bloomberg says.

Rob Dobson, a director at IHS Markit, said: “The current high degree of market uncertainty, both at home and abroad, and currency volatility will need to reduce significantly if UK manufacturing is to make any positive strides towards recovery in the coming months.”

Indeed, some are already speculating that the very opposite of recovery is on the cards for the months ahead. The Independent’s James Moore says: “The next big question is whether we have entered a recession, given that GDP contracted in the last quarter. It takes two of these in a row to tick that particular box.”

However, Andrew Wishart, UK economist at Capital Economics, told the BBC that while the data was weak, “we still doubt that manufacturing will pull the economy as a whole into recession”.