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UK industrial production slump raises fears of longer recession UK industrial production slump raises fears of longer recession
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Industrial production slumped last month, heightening fears that the UK's slide into recession will continue through the summer.Industrial production slumped last month, heightening fears that the UK's slide into recession will continue through the summer.
Manufacturing slipped 0.3% on a year ago while the broader measure of industrial production, which includes oil and gas production and mining, declined by 1%. Economists said the figures will increase the pressure on the Bank of England to ease monetary policy at its next meeting in July. Manufacturing slipped 0.3% on a year ago while the broader measure of industrial production, which includes oil and gas production and mining, declined by 1%, according to figures from the Office for National Statistics.
The drop in production follows a series of surveys showing British manufacturing firms resisting the government's call to increase production for new export markets in the far east, South America and Africa. Most exports continue to head for EU countries where demand has collapsed following the eurozone crisis. Economists said the figures were unexpectedly weak and will increase the pressure on the Bank of England to ease monetary policy at its next meeting in July. A report by the National Institute of Economic and Social Research (NIESR) predicting economic growth will flatline for at least the next six months will add to demands for greater support from the central bank.
The drop in manufacturing output follows a series of surveys showing firms are resisting the government's call to increase production to new export markets in the far east, South America and Africa. Most exports continue to head for EU countries where demand has collapsed following the eurozone crisis.
The British Chambers of Commerce said the main barriers to exporters were red tape and the lack of credit from banks and other lenders. It warned the Treasury that its aim to support a "march of the makers", which the chancellor George Osborne highlighted in his budget speech last year, was stuck in the starting blocks until banks were ready to lend again.The British Chambers of Commerce said the main barriers to exporters were red tape and the lack of credit from banks and other lenders. It warned the Treasury that its aim to support a "march of the makers", which the chancellor George Osborne highlighted in his budget speech last year, was stuck in the starting blocks until banks were ready to lend again.
The BCC admitted that almost three-quarters of the 8,000 businesses surveyed had failed to put in place a formal export strategy, but argued they were unwilling to make the investment while expensive barriers remained in place.The BCC admitted that almost three-quarters of the 8,000 businesses surveyed had failed to put in place a formal export strategy, but argued they were unwilling to make the investment while expensive barriers remained in place.
John Longworth, the BCC's director general, said: "Many firms lack an export strategy and many only became exporters by chance. We need to find ways to make our businesses think globally, and provide them with the support they need to break into new markets. Not only will this help to boost the UK economy, but it will show the world that Britain remains a major global competitor and a nation to do business with."John Longworth, the BCC's director general, said: "Many firms lack an export strategy and many only became exporters by chance. We need to find ways to make our businesses think globally, and provide them with the support they need to break into new markets. Not only will this help to boost the UK economy, but it will show the world that Britain remains a major global competitor and a nation to do business with."
Longworth said the government should set up a business bank to support small and medium-sized businesses with loans. He said more firms needed to be made aware of government-backed credit guarantees that act as insurance policies should trade deals fall through. Longworth wants the government to fund a business bank to support small and medium-sized businesses with loans. He said more firms needed to be made aware of government-backed credit guarantees that act as insurance policies should trade deals fall through.
The Office for National Statistics said the biggest drop in the manufacturing sector was among food and drinks businesses, with alcoholic beverage producers the hardest hit. Figures from the Office for National Statistics showed the biggest drop in the manufacturing sector was among food and drinks businesses, with alcoholic beverage producers the hardest hit.
The category for the repair and installation of machinery and equipment fell by 12.2%, provoking fears that manufacturers are delaying upgrades and maintenance until sales pick up.The category for the repair and installation of machinery and equipment fell by 12.2%, provoking fears that manufacturers are delaying upgrades and maintenance until sales pick up.
Oil and gas production showed a 15% fall on a year ago, matching an identical fall in mining and quarrying. The volume of output from the mining and quarrying sector is now almost 40% lower than its 2008 peak.
Nida Ali, economic adviser to the Ernst & Young Item Club, described the ONS figures as a "very disappointing start to the second quarter".Nida Ali, economic adviser to the Ernst & Young Item Club, described the ONS figures as a "very disappointing start to the second quarter".
She added: "In particular, the monthly decline in manufacturing output is worrying, given that business surveys in April had indicated that output would continue increasing. With the Markit purchasing managers index survey for May reporting a further slump in activity, the near-term outlook for the sector is pretty bleak." She added: "In particular, the monthly decline in manufacturing output is worrying, given that business surveys in April had indicated that output would continue increasing."