Manufacturing growth slows to a two-year low
Britiain's economic hopes were dealt another blow as a key survey revealed that the manufacturing sector contracted for the first time in two years last month.
The Markit Purchasing Managers' Index (PMI) recorded a level of 49.1 for July - a reading above 50 indicates growth - down from a revised reading of 51.4 in June.
New orders fell for the third month in a row and at the fastest rate since May 2009 - reflecting low domestic demand, Markit said yesterday.
Economists said the results do not bode well for third-quarter growth prospects in the UK, after official figures revealed a slowdown in GDP growth from 0.5% in the first quarter to 0.2% between April and June.
The manufacturing sector has seen a downturn in its fortunes in recent months after a strong patch when it appeared to be leading the economic recovery.
Surveys from the likes of Markit and the CBI have shown an industry in gradual decline as output growth and new orders dwindle in the face of a challenging economic climate.
The survey will be a blow to Chancellor George Osborne, who has pinned his hopes on the private sector to keep the economy afloat as he rolls out swingeing public sector spending cuts.
Howard Archer, chief UK and European economist at IHS Global Insight, said Markit had published a "pretty horrible survey".
He said: "It is evident that manufacturers are now finding life really challenging as domestic demand is held back by serious headwinds including tightening fiscal policy."
The survey did record export growth for the 10th month in a row as companies reported improved sales to Australia, China, New Zealand and the US.
Manufacturing employment declined slightly in July, Markit said, representing a turnaround from the survey's record jobs growth seen only five months earlier.