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Concern grows that the United Kingdom is heading towards a triple dip recession
The pound sterling has fallen to a two-and-a-half year low of 1.4832 against the United States dollar following news that the UK’s manufacturing sector fell by 1.5% during January.
Whilst the pound regained lost ground to close trading at $1.4902 the decline in manufacturing output has raised concern that the UK economy is heading towards another recession, the third since the start of the financial crisis.
Responding to the manufacturing data the UK’s Chancellor of the Exchequer George Osborne said that the government had put in place measures to support the sector. “The steps we have taken to support manufacturers, to help with investment allowances as I’ve announced, to make sure they have access to those growth parts of the world like China and India, this is all part of rebalancing and rebuilding the British economy”, the Chancellor argued.
Published by the Office of National Statistics the figures come shortly before the Chancellor is due to deliver the UK government’s 2013-14 budget and soon after Moody’s downgraded the country’s credit rating to Aa1.
Speaking ahead of the manufacturing figures the Prime Minister, David Cameron, indicated that the UK is unlikely to radically changes its policy of austerity and that he does not support calls by Dr Liam Fox, a former member of Mr Cameron’s cabinet and prominent Conservative party backbencher, to suspend Capital Gains Tax aimed at stimulating the economy.
The Prime Minister and Chancellor also face opposition from Vince Cable, the government’s Business Secretary and member of the junior coalition partner Liberal Democrats, last week argued that the government could potentially take advantage of the country’s low interest rates to borrow more to invest in the economy.
Manufacturing had previously thought to be recovering after a 0.9% rise recorded in December 2012. Regarded as a key indicator of the economy’s performance Mike Rigby, Barclays’ Head of Manufacturing, said January’s figures demonstrated “that the outlook remains difficult with uncertainty set for the medium-term”.
Mr Rigby further argued that the figures highlighted wider problems facing the UK economy, saying that “Manufacturing has long been seen as a precursor for the UK economy, and therefore it’s no surprise that current activity mirrors the challenging economic environment.”
