The latest figures on manufacturing show that the sector is
expanding at its fastest rate since records began nearly twenty
years ago.
Professor David Bailey from Coventry University's Business
School said:
"This is of course pretty much what we had predicted when we
were in the depths of the recession, but it is such a shame that
more wasn't done to protect manufacturing in the UK during the
downturn. If we had taken a lead from other European countries we
might have a bigger manufacturing sector to provide the growth we
now so desperately need."
Although the UK has seen an impressive growth for new orders and
employment, manufacturing has also seen rising input costs and this
has been passed on through large increases in commodity costs.
Professor Bailey said:
"We may see further calls for the Bank of England to raise
interest rates. Sterling, in turn, would strengthen on the
expectation of an interest rate rise.
"In fact, markets reacted immediately, pricing in a greater
chance of an interest rate rise. Even the Bank's governor Mervyn
King said recently that inflation was more of an immediate concern
than growth, warning that households were undergoing the worst
squeeze on finances since the 1920s.
"If the Bank raises rates too slowly there is a danger that
inflation will take off and become entrenched. But if it raises
rates too quickly we risk derailing an already stuttering recovery
and entering double dip territory.
"The government claim that the positive manufacturing figures
back up its belief that the economy would rebalance with the
private sector creating jobs as public sector jobs are lost.
However, I'm not so sure that the manufacturing sector will
continue to expand so rapidly after the first quarter of this
year."
Professor Bailey added that the number one priority at the
moment is to create jobs and to cut the deficit:
"Given the scale of fiscal cuts we're about to face, the Bank
will need to hold its nerve and keep monetary policy loose for as
long as possible so as to keep the economy moving."
For more information about Coventry University, please visit
their website here: www.coventry.ac.uk