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Thursday, 7 February, 2002, 12:31 GMT
Manufacturing gloom continues
Containers being loaded
Manufacturers argue the strength of sterling hampers exports
Output in the UK's manufacturing sector has recorded its largest annual decline for more than 10 years.

New figures from the Office for National Statistics showed a 0.5% fall in December, slightly better than November's drop of 0.6%.

Compared to December 2000, output was 6.4% lower - the largest fall since August 1991.

The figures were worse than expected and may dash hopes than the sector was beginning to recover.

The wider measure of industrial output also shrank by 0.3% in December, implying a 4.6% drop since the same month the previous year.

Manufacturers have called for more cuts in interest rates to help the beleaguered sector.

But on Thursday the Bank of England left the UK base rate unchanged at 4%.

The Engineering Employers' Federation called the decision "a missed opportunity to boost business confidence."

Economy split

UK industry has been hard hit by the global economic slowdown, and by the strength of sterling which has made exports more expensive.

Just this week the vacuum cleaner maker Dyson announced that it was transferring production to the Far East, which could lead to the loss of 800 jobs in the UK.

In contrast the continued strength of consumer demand has meant the recession in the manufacturing sector has not yet spread to the rest of the UK economy.

Recent surveys had suggested that there were some signs of industrial recovery.

Last week a study by the Chartered Institute of Purchasing and Supply found that although output was continuing to fall, it was dropping at a slower rate.

But analysts say a recovery is still a long way off.

"Manufacturers were very gloomy at the end of last year and have been furiously de-stocking," said Richard Iley, an economist at ABN Amro.

"I would expect the pace of decline, however, to moderate over the next few months... but the stock overhang still needs to be worked off."

See also:

04 Feb 02 | Business
Manufacturing's 'ray of light'
01 Feb 02 | Business
Signs of hope for UK manufacturers
14 Jan 02 | Business
UK manufacturing slumps again
20 Dec 01 | Business
UK economy set to outperform
06 Aug 01 | Business
Q&A: The manufacturing recession
03 Jan 02 | Business
'Bumpier ride' ahead for UK economy
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