A survey has shown that Britain's manufacturers recorded the slowest pace of growth in almost two years last month, as factories reduced hiring and new orders fell. The figures are likely to reinforce concerns about the health of the broader UK economic recovery.
The slowdown adds to a string of recent bad news on the economy which is struggling to gather pace after a shock contraction at the end of last year. Consumers especially have reduced spending as soaring prices, higher taxes and government job cuts hit their budgets.
The Markit/CIPS manufacturing PMI index sank to a 21-month low of 51.3 in June from May's downwardly revised 52. Economists had expected the figure to be little changed from May.
'The manufacturing sector continued to slip closer to stagnation in June,' said Rob Dobson, senior economist at Markit. 'The data will call into question the sector's ability to play a major role in delivering a robust and sustainable economic recovery.'
Manufacturing, which makes up about 14% of the British economy, grew by a modest 0.7% in the first three months of the year. Britain's government and the Bank of England are relying on strong, export-driven manufacturing growth to support the broader economy.
Weaker PMI surveys in other European economies indicated export growth is set to fade further, however, suggesting the current slowdown in UK manufacturing may not simply reflect the loss in production caused by April's additional public holiday for the royal wedding.
The PMI survey showed that UK firms hired staff at the slowest pace since last September, and new orders fell for a second straight month, with companies blaming lower overseas demand, reduced government spending and customers delaying new contracts.
The only bright spot was one of the biggest declines in the rate of input cost growth since the survey started in 1992, due to the sharp fall in oil prices over the period. The PMI's input cost component fell to 60.9, its lowest since December 2009, from 71.4. Output price inflation fell by a smaller margin, dropping to its lowest rate since December 2010. This reduces pressure on the Bank of England to raise interest rates.