Comment: Industry slowly manufacturing turnaround

Martin Flanagan. Picture: Adrian Lourie
Martin Flanagan. Picture: Adrian Lourie
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THE recovery in smokestack industry – what is left of it since the major realignment of the UK economy to the sector services since the 1970s – is taking hold.

Latest figures show manufacturing grew in November at its fastest in nearly three years, following the two previous months when the pace of expansion slowed.

The performance still falls short of George Osborne’s fabled march of the makers, but last month was further solid evidence that the UK recovery is broadening and deepening.

It is from a low base, admittedly, and we are still well below the economic growth experienced before the financial implosion and recession of 2008-9. But good news, nevertheless.

It will undoubtedly allow the Chancellor even more scope to announce expected upgrades to economic forecasts in his autumn statement this Thursday.

Unsurprisingly, the latest data also fuelled the belief in financial markets that a rise in interest rates from their historic lows will now come in the latter half of 2014 rather than much farther out as previously guided by Mark Carney, governor of the Bank of England.

On the forex markets, sterling touched a five-year high against a basket of foreign currencies. It was good for manufacturing across the board, from employment and new orders to exports.

The latter was helped by demand from the eurozone, which takes 40 per cent of all UK exports and which is gradually working its way out of its austerity straitjacket.

Bank hails success of lending scheme

ELSEWHERE, there was positive data from the flagship scheme to get more money into the economy. The Bank of England revealed that net lending – the difference between money lent and loans repaid – by banks under the Funding for Lending Scheme (FLS) was £5.8 billion in the third quarter, more than three times the quarter before.

The figures go a long way to explain why the Bank of England decided last week to cut FLS support for the mortgage market, a move that looks impressively anticipatory in heading off a new housing bubble.

In contrast, the latest figures show that the FLS still has a role to play in stimulating the UK economy as high street bank lending to small businesses in the third quarter remained muted.

With the raft of positive economic data (see item one, also) we are getting to the stage now where better news is almost becoming expected by the markets, factored in to the price of assets.

It is a pleasant sensation after the five previous lean years, when negative data and poor prospects became the norm. Without getting carried away, let’s enjoy it.

Twitter: @martinflanagan8