Triple-dip fears after bad month for manufacturers

A DIRE month for Britain’s manufacturers has fanned fears of a triple-dip recession and piled further pressure on the pound.

The latest gloomy data from the Office for National Statistics (ONS) comes just a week ahead of the crucial Budget statement, with Chancellor George Osborne facing calls to relax his austerity measures.

The UK economy contracted by 0.3 per cent at the end of 2012 and will return to recession if there is another decline in the current quarter.

Scotiabank economist Alan Clarke said news of an unexpected decline in manufacturing was the “penultimate nail in the coffin in terms of triple-dip”.

“It’s pretty much game over now,” he added. “Unless we have a stellar performance from the services sector, we’re almost certainly in a triple dip.”

Manufacturing output fell 1.5 per cent during a snow-hit January, wiping out December’s gain and bucking forecasts for a flat reading.

The decline meant that overall industrial output, which also includes energy and mining production, dropped by 1.2 per cent in January, dashing City hopes for a better performance over the month.

Other factors behind the fall included the closure of the Schiehallion oil platform in the North Sea, which drove a 4.3 per cent slide in oil and gas output.

The pound slipped to a fresh two-and-a-half-year low of $1.48 in the wake of the figures.

Weak industrial production was one of the main drags on the UK economy in the final three months of 2012, leading to its return to the red. While it is still possible the services sector could ride to the rescue this quarter, the bleak manufacturing figures will increase the pressure on the Bank of England to boost stimulus measures next month.

Most City experts believe there will be more quantitative easing this spring, with interest rates held at a record low for a further two years.