Manuf. output fuels economy

Posted on 11 May 2010 by The Manufacturer

Manufacturing provided a big boost to UK GDP growth expectations today, after the Office for National Statistics revealed a 2.3% jump in output during the month of March.

It is the strongest month-on-month rise in almost eight years and may mean the 0.2 per cent growth in the UK’s economy in the first quarter of 2010 is revised upwards.

Analysts had expected a rise of around just 0.4 per cent.
Output rose in 12 of the 13 manufacturing sub sectors, with the basic metal and metal products industries (3.9%), the paper, printing and publishing industries (2.7%) and the machinery and equipment industries (4.2%) the biggest gainers. The textiles, leather and clothing industries was the only subsector to decline (-0.5%).

Earlier today, PricewaterhouseCoopers released a report which said mergers and acquisitions may increase in the UK as a result of decent manufacturing activity here and Graeme Allinson, head of manufacturing at Barclays Corporate, reiterated this possibility when commenting on the output figures.

“The manufacturing bounce back continues as the sector made up significant ground in March compared with where it stood 12 months ago,” he said. “The UK’s recent growth mirrors that of other international markets where increasing economic stabilisation has bolstered manufacturing output.

“Barclays Corporate has noted that along with a recent pick-up in applications for M&A funding, there is increased sector interest in public to private deals. This in part reflects the fact that UK markets are not adequately recognising how well the manufacturing sector has dealt with the current crisis, and therefore, we believe, leaving it somewhat undervalued.

“With an undervalued sector, international buyers may also smell a bargain and UK manufacturers could become cross border acquisition targets, as interest in UK plc increases and the Sterling continues to make such ventures an attractive prospect.”

Jonathan Loynes, chief European economist at Capital Economics, said the GDP estimate is likely to be revised up to 0.3% on May 25 as a result of the strong manufacturing output.