UK manufacturing on ‘strong footing’

Rolls of steel

Activity in the UK’s manufacturing sector hit a two-and-a-half-year high last month, according to a survey.

The Markit/CIPS for the sector rose to 56.1 in December from 53.6 the month before. A figure above 50 indicates expansion.

The weaker pound helped to boost orders from overseas, the survey found, with the sector starting the year on a “strong footing”.

However, it also said that cost pressures faced by firms remained high.

“The UK manufacturing sector starts 2017 on a strong footing,” said Rob Dobson, senior economist at IHS Markit.

“Based on its historical relationship against official manufacturing output data, the survey is signalling a quarterly pace of growth approaching 1.5%, a surprisingly robust pace given the lacklustre start to the year and the uncertainty surrounding the EU referendum.

“The boost to competitiveness from the weak exchange rate has undoubtedly been a key driver of the recent turnaround, while the domestic market has remained a strong contributor to new business wins.”

December’s headline PMI reading was a 30-month high, and the Markit/CIPS survey said rates of growth for production and new orders last month were among the best seen over the past two-and-a-half years.

It said companies saw “stronger inflows of new work from both domestic and overseas clients, the latter aided by the boost to competitiveness from the weak sterling exchange rate”.

Sterling fell sharply against other currencies last year following the UK’s vote in June to leave the EU, which has made UK goods cheaper for buyers from overseas.

However, the weakness of the pound has pushed up the price of imported goods, which has led to higher costs for many manufacturers.

The survey said price pressures remained “elevated” in December, with inflation for input costs and output charges remaining “among the fastest seen during the survey history”.

It added that companies passed on the higher costs, with selling prices rising for the eighth month in a row.

Many analysts expect these rising costs to lead to higher prices for consumers this year, pushing up the rate of inflation.

First-time buyer subsidised homes ‘will be built this year’

Bricklayer laying bricks

Thousands of homes for first-time buyers will be built this year, according to the government.

Thirty areas across England are to receive funding from the £1.2bn “Starter Homes Land Fund” for new developments on brownfield sites.

Buyers must be aged between 23 and 40 and will receive a discount of at least 20% below market value.

However, one housing expert told the BBC that the timescale for the programme was too ambitious.

The Starter Homes Land Fund was first announced by the coalition government in 2014 and aims to help more people buy a home.

The discounts will apply to properties worth up to £250,000 outside London, or £450,000 in the capital.

Housing Minister Gavin Barwell said: “This government is committed to building starter homes to help young first-time buyers get on the housing ladder.

LSE housing professor Christine Whitehead on the government’s starter home fund

“This first wave of partnerships shows the strong local interest to build thousands of starter homes on hundreds of brownfield sites in the coming years. One in three councils has expressed an interest to work with us so far.”

The were chosen on the basis of their ability to build the properties quickly enough. They include Blackpool Council, Bristol City Council, Sheffield City Council and Luton Borough Council. The properties are expected to go on sale in 2018.

But speaking to the BBC, Christine Whitehead, Emeritus Professor in housing economics at the London School of Economics, said the “timescale is much too short, it’s not that easy to build on land that quickly, and we are anyway short on skills”.

John Healey, Labour’s shadow housing secretary, said: “These so-called starter homes are a symbol of the Conservative record on housing.

“Ministers launched them in 2014 but will only start to build the first in 2017, promised they’d be affordable for young people when they’ll cost up to £450,000, and pledged to build 200,000 by 2020 but no-one now believes that’s possible.”

Prof Whitehead said that, even with government help, some young people were not in a strong enough financial position to participate in the scheme: “[They] often haven’t got very strong jobs, they’re insecure about their future, they’re paying high prices in the rental market and therefore can’t afford the deposit.”

This is the government’s second announcement this week on measures to tackle the UK’s housing shortage. On Monday, for England’s first garden villages on 14 sites spread across the country from Cornwall to Cumbria. It said the new developments could provide 48,000 homes.

In addition, it said three new garden towns would be built at Aylesbury, Taunton and Harlow & Gilston, in addition to seven already in the pipeline.

Later this month, the government is due to publish its White Paper on housing supply in which it will set out its plans for building new homes.

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