Wednesday 11 May 2016 10:05 am

UK production industry falls into recession as manufacturing continues to disappoint

By: Jake Cordell

The UK production industry flat-lined in March 2016, pushing the industry into recession as it continues to act as a drag on Britain's economic performance.

Figures released by the Office for National Statistics (ONS) this morning showed that industrial production decreased by 0.4 per cent during the first three months of the year. Manufacturing – the largest component of the category – was also down by 0.4 per cent.

Read more: Every part of the UK economy is slowing down

In March, manufacturing output picked up by just 0.1 per cent, which was not enough to offset declines earlier in the year.

Manufacturing has not recovered from the financial crisis, with the industry still 6.9 per cent below its pre-downturn peak in terms of its contribution to Britain's GDP. Over the last the year, the ONS said the industry has swung up and down with the fortunes of the global economy and is currently 1.9 per cent smaller than in March 2015.

Germany is alone among the major developed nations in maintaining production's share of total economic output over the last 15 years. The decline of the UK's production industry has been the sharpest.

The second consecutive quarter of contraction means that the UK production sector is now officially in contraction.

"There isn’t too much in the data to lift economic spirits as a small increase in manufacturing output in March doesn’t change the picture of an overall weak start to the year," said Lee Hopley, chief economist at the EEF.

Ruth Miller, UK economist at Capital Economics, added: "While Brexit uncertainty may be partly to blame, the sector’s poor performance of late is certainly nothing new and many of the headwinds to growth in 2015 emanating from a weak global environment are still in place."

Purchasing managers' index (PMI) data released last week suggests that the outlook worsened for the manufacturing industry at the start of the second quarter. The PMI dipped below the crucial 50 mark which separates an expanding industry from a contracting one in April, falling to 49.2 – its lowest level in three years.