EEF cuts forecast for 2016 UK manufacturing growth

UK manufacturing sector activity is expected to grow less than previously estimated this year amid jitters ahead of the nation’s referendum on its European Union membership, the EEF has said.

The EEF has cut its forecast for UK manufacturing growth in 2016 to 0.6% from a previous forecast of 0.8% as Britain’s EU membership referendum could add to caution among factory managers.

The manufacturers' organisation also said overall economy growth would be 1.9%, compared to an earlier estimate of 2.1%.

"The slide is bottoming out, but manufacturing is still in negative territory and faces a precarious climb back up amidst a storm of real uncertainty," EEF chief economist Lee Hopley said.

EEF’s latest quarterly balances of new orders and output remained in negative territory, although they improved after falling to a six-year low in late 2015.

Data from Markit last week showed Britain’s manufacturing purchasing managers’ index fell to 50.8 in February from 52.9 a month earlier, missing analysts’ estimates of 52.3. A reading above 50 signals expansion while a level below that indicates a contraction.

Markit’s PMI on construction also revealed a slowdown in activity for February. The PMI dropped to 54.2 from 55.0 in January, trailing forecasts of 55.5.

A slowdown in emerging markets and a slide in oil and commodity prices have hurt the industry.