Industry woes pile up ahead of Tata sale pushComments Off on Industry woes pile up ahead of Tata sale push
Chancellor George Osborne suffered a double blow from poor economic data today, including much worse than expected news on manufacturing on the eve of the start of the sale process for Tata Steel.
Industrial output recorded its biggest fall for two and half years in February, according to official figures, which confirmed increasingly gloomy surveys that have shown a sharp economic slowdown since the start of the year.
The UK also saw a much bigger than expected trade gap with the country sucking in record imports from the European Union.
Industrial output dived 0.3% month on month in February to give a 0.5% fall on the year, its biggest drop since August 2013, the Office for National Statistics said.
The figures confirm anecdotal evidence that large companies have put investment plans on hold until the referendum on EU membership in June, while global sentiment has been hit by the slowdown in China.
Howard Archer of IHS said the numbers were a “double whammy of very disappointing news for the UK economy that bodes ill for first-quarter growth prospects”.
Economists were shocked by the 1.1% fall in manufacturing in February, which took the annual rate of decline to 1.8%, the biggest fall since 2013. That will not boost prospects for Tata Steel UK’s sale, on which thousands of jobs depend.
A deal has reportedly been lined up by private-equity firm Greybull to buy its Scunthorpe works and invest £400 million, which could be announced on Monday. That is the day the Indian firm Tata will formally open the sale process for the rest of the business, including the massive Port Talbot works in South Wales. So far Business Secretary Sajid Javid has only named Liberty Steel as a potential buyer.
Dennis de Jong, managing director of forex broker UFX.com, said: “A wealth of cheap steel on the market has seen global prices plummet and, without raising import tariffs or government intervention, many believe the British steel industry will be forced to shutter completely.”
The trade deficit for February came in at £12 billion, far higher than the average £10.2 billion predicted by economists. January’s figure was also revised upwards to £12.2 billion, another blow for Osborne (pictured).
Ruth Miller of Capital Economics said: “February’s trade figures showed that the economy is still struggling to rebalance towards exports. The recent falls in sterling will take some time to support exporters, due to the time lags involved in renegotiating contracts. So the odds remain stacked against a material narrowing in the trade deficit in the near term at least.”