Car production and construction weigh on industrial output

A pick-up in Britain's industrial output in June was marred by a slump in car production and a fall in construction as the economy continued to stutter.

Car production fell 3.6%, with construction output also declining. Picture: Owen Humphreys/PA
Car production fell 3.6%, with construction output also declining. Picture: Owen Humphreys/PA

Figures from the Office for National Statistics (ONS) showed industrial output rose 0.5 per cent month-on-month in June, largely down to North Sea oil producers delaying their usual summer maintenance.

Year-on-year, production was up 0.3 per cent in June following a decline the previous month.

However, transport equipment manufacturing, including car production, fell 3.6 per cent.

Construction output dropped 0.1 per cent, contracting for the third consecutive month, and fell 1.3 per cent in the second quarter.

But Gordon Reid, business development manager at Kier Construction Scotland, said: “Recent reports on the bigger picture point to the industry being stronger and more resilient than ever.

“The construction industry remains resilient and in good health and we will continue to showcase the breadth of career opportunities and highlight the huge benefit that this important sector delivers to the Scottish economy.”

Cruden Building & Renewals managing director Allan Callaghan acknowledged that the housebuilding sector has endured “some big challenges”, including the impact of the Brexit-battered pound, which has pushed up raw materials prices, but insisted the industry remains “buoyant”.

He added: “The sector is a major employer in Scotland and plays a big part in addressing youth employment. The issue of labour and resource shortages in the short to medium term needs to be addressed.”

While sterling’s slump since the Brexit vote has put consumers under pressure, the pound’s weakness was supposed to boost UK exports by making British goods cheaper for overseas buyers.

However, separate data published by the ONS showed that a boost to UK trade again failed to materialise.

The UK’s deficit in goods and services, the gap between exports and imports, widened by £2 billion to £4.6bn between May and June after a slump in exported goods.

For the second quarter as a whole, the deficit rose £100 million to £8.9bn.

James Smith, economist at ING, said: “This is particularly concerning when you consider the backdrop of a 13 per cent post-Brexit fall in the pound and the significant improvement in global growth prospects (particularly in Europe, a key trading partner for the UK).

“Whilst these developments appear to have boosted sentiment amongst manufacturing firms, according to recent PMIs, we aren’t seeing this being translated into the official data.”