UK Industry Enters Recession As Economy Slows

UK industry has entered recession following two successive quarters of shrinking output, according to official figures.

The Office for National Statistics (ONS) measured falls of both 0.4% in the final quarter of 2015 and in the first three months of this year.

While that spelt a technical recession for the sector, the ONS measured growth of 0.3% between February and March.

There was month-on-month growth of just 0.1% for the wider manufacturing sector - with output 1.9% lower on an annual basis in what was the biggest year-on-year decline since 2013.

The main driver of this was a 37.4% fall in the manufacture of basic iron and steel in the year to March, the ONS said, reflecting weak demand in the global and UK economy and the squeeze facing the sector from Chinese imports.

The manufacturing and construction sectors have contributed to a slowdown in the UK economy - with output just 0.4% higher in the first quarter of the year following growth of 0.6% in the final three months of 2015.

A closely watched reading of activity in the economy has suggested it is near-stalling with the powerhouse service sector, which accounts for more than 75% of UK GDP, slowing towards a crawl.

The Markit/CIPS purchasing managers' index (PMI) for services released last week showed business activity at a 38-month low and employment rising at its slowest pace since August 2013.

Then, on Tuesday this week, another set of ONS figures measured Britain's trade gap with the rest of the world at its widest level since the financial crisis.

Economists have suggested that uncertainty around the outcome of the UK's referendum on EU membership in June is delaying investment.

Chris Williamson, Markit (NasdaqGS: MRKT - news) 's chief economist, said in reaction to today's figures: "Producers are being squeezed by a combination of weak global demand as well as waning sales in the home market, the latter in some cases linked to decision making and purchases by customers being affected by Brexit uncertainty."

It (Other OTC: ITGL - news) was not all doom and gloom.

Ruth Miller, UK economist at Capital Economics, said: "Sterling’s recent depreciation and our expectations that global growth will pick up slightly in 2016 should allow the sector to return to modest growth later this year."