When the minor ups and downs caused by the extra bank holiday for the Queen’s funeral are stripped out of the latest GDP figures, it is clear the long decline of Britain’s industrial base has accelerated.
Protected by the government through the coronavirus pandemic, this year, factory owners say ministers have abandoned them to cope with a long recession without so much as a glance in their direction.
The squeeze from inflated materials costs, a shortage of workers that has pushed up wages and declining demand for their products is especially crippling while the government spends its time navel-gazing, they say.
As the British Chambers of Commerce makes clear in its response to figures showing the economy shrank by 0.2% in September, there is another factor damaging the outlook for manufacturing and exporters more generally, and that is Brexit.
The business lobby group says Europe remains a major export destination and Brexit has introduced barriers to trade that did not exist before 2021.
David Bharier, the head of research at the BCC, said he was mindful of Jeremy Hunt’s stated aim of calming financial markets next week with a robust autumn statement that could be trusted to add up “after the recent self-inflicted turmoil”.
However, he added: “Businesses need to see a long-term economic plan that invests in people, skills, and infrastructure and radically improves our trading relationships with key markets, not least across Europe.”
All 13 manufacturing subsectors recorded falls in output in September. As a whole, manufacturing fell 2.3% to record the worst performance over three months since the 1980s.
To give an indication of the poor performance in more recent times, output is no higher than it was in July 2021, since when most other industrialised countries have been participating in a manufacturing boom.
So we have a situation familiar to those that look back over the last 70 years of boom and bust, and that is the custom and practice among manufacturers of greeting every recession with a step down in output.
The purchase of new equipment and processes to drive productivity is crucial for the sector’s survival, yet business investment shrank 0.5% over the quarter.
Worryingly, the output of the information and communication sector, which covers the IT industry, slumped by 3.2% month on month in September. This sector survived the pandemic in reasonable health, and to see it decline going into a recession reveals an anxiety among finance directors that bodes ill for the future.
Shops fared little better as consumer spending dropped quarter on quarter by 0.5%. The wholesale and retail sectors combined experienced a drop of 2% in output, and many expect worse to come.
There are bright spots in the economy, although they mostly rely on the spending power of richer households.
Heathrow’s announcement that it is planning for a Christmas bonanza of flights depends on better-off consumers, many of whom still have savings left over from the Covid-19 pandemic, splashing the cash.
If they buy manufactured products, they will usually be from China.
There is every prospect that by the end of next year that the cost of Chinese goods will have fallen steeply, driven lower by reduced shipping costs and a less draconian attitude to Covid-19 outbreaks, keeping factories open and goods flowing more consistently.
Inflation will tumble, the Bank of England will cut borrowing costs and GDP will begin to recover.
British manufacturing, meanwhile, will continue to lurch downwards, leaving only the most productive to survive.
