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Further Strength In British Manufacturing

James Boston
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Further Strength In British Manufacturing

The UK is the latest country this morning to publish it’s Markit Economics Purchasing Managers Index for the manufacturing sector. The June figure has been announced at 57.5, this is a further increase on the May reading of 57.0 and comes in ahead of the markets expectations of a 56.8 level.

The British manufacturing sector is considered to be in relatively good shape as we enter the second half of the year. The sector, which was late to the recovery, is now feeling the benefit of the investment that it was initially lacking. High consumer spending in the UK is also buoying domestic demand for British manufactured goods, this is particularly evident in the food and beverage sector where the home market is predominant.

The strength of the British Pound however is contributing to a dampening of export expectations, and despite order books being at their fullest level so far this year, sentiment is being affected by the prospects of losing out on some international competitiveness. A pick up in global demand, particularly for autos and electronics is somewhat insulating British exporters from a rising currency, however a reduction in import costs due to the strengthening of Sterling is putting pressure on domestic prices.

The British Chancellor, George Osbourne, publically made it a goal in 2012 to double the value of UK exports to around £1 Trillion by 2020. This is currently near target as the Government work hard to promote British industry abroad and strengthen a network of trade agreements. There is particular focus on negotiations with China and whereas the current situation is far from the deal the Swiss entered into recently, there is believed to be significant progress made the British. Tariff reductions would no doubt aid British exports but the real issue is competitiveness, this can partially be addressed by controlling currency appreciation.

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