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UK economic system hit by ‘dramatic’ fall in automotive output

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A “dramatic” fall in automotive manufacturing and an easing of stockpiling by producers meant the economic system shrank in April, official figures present.

The economic system contracted zero.four% from the month earlier than, according to the Office for National Statistics (ONS).

The contraction meant progress for the three months to April slowed to zero.three%.

Manufacturing facility shutdowns designed to deal with disruption from a March Brexit slashed UK automotive manufacturing in April by practically half, the industry said last month.

BMW’s Mini manufacturing facility in Oxford introduced ahead its summer season upkeep shutdown to April to minimise any disruption surrounding Brexit. Different producers’ annual stoppages have been additionally introduced ahead.

‘Hangover’

The economic system had seen a spurt of progress within the run-up to the proposed March date for the UK leaving the European Union, as producers stockpiled components, uncooked supplies and items within the anticipation of holdups on the border.

After the Brexit deadline was prolonged to October, it suffered the reverse results as these provide reserves have been used up and fewer purchases have been made.

“The hangover that is adopted the UK’s unique exit date is proving stronger than anticipated, mentioned Yael Selfin, chief economist at accountants KPMG UK.

“At this time’s figures sign the UK economic system is more likely to expertise extra subdued progress for the remainder of the yr, marred by Brexit uncertainty.”

ONS statistician Rob Kent-Smith mentioned: “Development confirmed some weakening throughout the newest three months, with the economic system shrinking within the month of April primarily attributable to a dramatic fall in automotive manufacturing, with uncertainty forward of the UK’s unique EU departure date resulting in deliberate shutdowns.

“There was additionally widespread weak spot throughout manufacturing in April, because the enhance from the early completion of orders forward of the UK’s unique EU departure date has pale.”

Evaluation:

By Jonty Bloom, enterprise correspondent

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Sadly Theresa Could gave British business just a few days’ discover that Brexit was being postponed and it was simply too late to cease carefully-honed plans swinging into operation.

Many companies feared Brexit would trigger not less than momentary disruption, so they’d been stockpiling parts and completed items to tide them over, and so they have been utilizing these shops up relatively than producing extra.

The automotive business introduced ahead its annual shutdown – often used to place in new tools, put together for brand new fashions and so forth. Consequently, automotive manufacturing fell off a cliff and manufacturing as an entire fell by practically four% in only one month.

Development might bounce again, however then Brexit is now scheduled for 31 October. How do corporations plan for that? Repeat the entire operation once more or not trouble? Actually the automotive business will not need one other shutdown, it has already had one this yr and Brexit might nonetheless be delayed once more.

‘Sluggish progress’

The contraction in April was far sharper than economists had anticipated.

Ruth Gregory, senior UK economist at Capital Economics, mentioned the figures counsel “underlying progress is fairly sluggish”.

“With the Brexit paralysis and a slowing international economic system taking its toll, we doubt GDP will develop by way more than 1.5% or so in 2019 as an entire and anticipate rates of interest to stay on maintain till the center of subsequent yr.”

The Society of Motor Producers and Merchants (SMMT) has estimated automotive manufacturing for the entire of 2019 can be about 10% down on final yr. It says the market may choose up by the tip of the yr if there’s a beneficial deal between the UK and the EU, and a considerable transition interval to adapt to buying and selling outdoors the only market.

However it has mentioned a no-deal Brexit will make the declines worse, with the specter of border delays, manufacturing stoppages and extra prices.

The Prime Minister’s official spokesman mentioned: “Whereas month-to-month figures are at all times changeable, the basics of our economic system are sturdy and it has grown yearly since 2010. Employment ranges are at a document excessive and wages rising in actual phrases.”


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