By Maximilian Clarke
Plummeting output in the UK’s mining and quarrying sector, coupled with a slight dip in industrial production whilst ‘disappointing’, are largely to be expected given constraints on demand resulting from the government’s austerity measures, the British Chambers of Commerce have said.
Figures published today by the Office for National Statistics show a year-on-year production drop of 3.1%. As the world’s 6th biggest manufacturer in value terms, manufacturing plays a crucial role in the UK economy. For this reason, the BCC have said, it is imperative that the government focus on credit easing in order to restore credit to manufacturing firms eager to expand, whilst taking further steps to nurture confidence among the UK consumer.
“These figures are disappointing, but largely as expected given the difficult economic circumstances we are currently facing,” said the Chambers’ chief economist, David Kern. “Domestic demand has been squeezed by the government’s austerity plan, and combined with problems in the eurozone it is not surprising that the sector has recorded a decline. There is no need for undue pessimism about the future of manufacturing, as many firms preserved their skills base during the recession. But, there will be serious challenges in the months ahead, particularly for those that rely heavily on exports to the eurozone.
“Every effort must now be made to contain the downward pressures on the economy and sustain confidence. We hope the MPC [Monetary Policy Committee] will announce an increase in the QE [quantitative easing]* programme, which will help to maintain the competitiveness of UK exports.
"This is especially important since the pound has strengthened by some six per cent against the euro in the last three months, which adds to the pressures facing exporters. Furthermore, the government must act quickly to introduce credit easing measures to help improve the flow of credit to viable businesses.”
* The MPC this morning announced that they have not introduced further QE despite mounting cries from the business organisations.
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