UK manufacturing shrinks further

Manufacturing declined at the fastest annual rate in 28 years

Manufacturing output in the UK declined for the 11th straight month in January, official figures have shown.

The Office for National Statistics (ONS) said it fell 12.8% from a year earlier as the downturn continued to affect the sector.

The drop was the fastest annual contraction in UK manufacturing since January 1981.

Manufacturing fell 2.9% on a monthly basis - more than twice the 1.4% that was forecast.

Record drop

Manufacturers have been struggling to cope with the UK economy having entered recession last year, and the figures from the ONS suggest the situation has been worsening.

In the three months to January, factory output fell by 6.4% from the previous three months, the biggest drop since records began in 1968.

Clearly, the essential rebalancing of the UK economy towards industry is not yet taking place David Kern, British Chambers of Commerce

The most significant falls were 10.8% in the transport equipment sector and 11.4% in the basic metal and metal products industries, the ONS said.

"The much worse than expected manufacturing figures show that the sector has so far failed to benefit from the sharp falls in sterling," said David Kern, chief economist at the British Chambers of Commerce.

So far, manufacturing exports have not benefited from the drop in the pound, which has dropped 31% against the dollar and 17% against the euro in the past 12 months.

Carmakers have been among the worst hit in manufacturing. Japan's Toyota, the world's biggest carmaker, is finalising plans for fresh cutbacks in its UK factories, which may include further shutdowns at its plants in Derby and in north Wales.

Data released at the same time showed broader industrial output, which also includes mining, oil and gas extraction and power supply, shrank by 2.6% in January from the previous month and by 11.4% from January 2008.

"Clearly, the essential rebalancing of the UK economy towards industry is not yet taking place," Mr Kern said.