Car makers drive longest period of manufacturing growth in UK since 1994

Britain’s car factories are helping drive the country’s manufacturing production to its longest period of growth in more than 20 years, according to government figures.

The Office for National Statistics (ONS) said cars made for export and a bumper month for pharmaceutical firms helped output grow for the sixth month in a row in October – the longest unbroken period of manufacturing growth since 1994.

A growth rate of 0.1% in manufacturing production in October pushed the annual rate of expansion to 3.9% and confirmed the manufacturing sector’s status as one of the brightest areas in the UK economy this year.

The last time manufacturers stitched together an unbroken run of five months was from December 2013 to May in the following year, the ONS said.

However, some economists warned that October’s growth rate fell short of the expansion seen during the summer, fuelling fears the UK economy is on course to grow at the slowest pace in the G7 next year.

Uncertainty about the outcome of talks with Brussels over the country’s future trading relationship with the EU is also expected to dampen investment and consumer confidence, despite a deal to discuss trade as part of a move to a second phase of Brexit talks.

Growth in overall industrial production, which includes output from mines, quarries, the oil and gas industry and energy plants, ground to a halt after warmer weather allowed power companies to cut production.

Data from the construction industry showed a dramatic drop in activity while official figures covering Britain’s trade with the rest of the world revealed a longstanding deficit widened in October.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said business surveys were consistent with solid growth in manufacturing output in the near-term.

“But past experience suggests that the impetus to growth in manufacturing output from the weaker exchange rate will fade soon, now that 18 months have passed since the biggest decline in sterling.”

Economists at Barclays said weak performance in the industry and construction sectors pointed to a 0.1 percentage-point drag on economic growth in the fourth quarter.

The Bank of England said last month it expected the economy to grow by 0.4% in the last three months of the year and to expand by 1.6% in 2018, after it raised its key interest rate for the first time since 2007.

Business surveys show factories are enjoying demand from a surging European economy, but also face an increase in price pressures because of the weak pound.

The ONS senior statistician Kate Davies gave an upbeat assessment of the outlook for manufacturing. She said: “While manufacturing was relatively subdued overall in October 2017 despite record production of cars destined for export, the longer-term picture is one of strong growth.”

Car manufacturers increased production by 6.3% in October compared with the same month a year ago, driven by an increase in export turnover. Firms recorded the highest ever value of exports last month, worth more than £4bn.

The ONS also said Britain benefited from increased production at two oil fields that started pumping in June – the new Kraken field in the North Sea, as well as the return of the Schiehallion field – 110 miles west of Shetland – which had been shut for refurbishment since 2013.

Britain continues to import more from the EU and the rest of the world than it exports to other countries. Excluding some commodities such as gold shipped in and out of London, which statisticians say can distort the figures, the UK’s trade deficit widened by £800m to £6.9bn in the three months to October.