Decrease in UK manufacturing and constructions point to slowing economy growth  

Monitoring Desk

LONDON: The UK’s sugar tax came into force on Friday, leaving a bitter taste for sugar companies and drinks manufacturers that now have to pay a levy on high-sugar drinks they sell.

In another blow to sugar companies and farmers, sugar prices have fallen to 2 1/2 year lows, due to a glut of sugar on the market caused by high output from India and Thailand.

India recently scrapped a 20% sugar export tax. The Indian Sugar Mills Association has revised its sugar output estimate for this season starting in October up to 29.5m tonnes. This still looks too low, as sugar output was 28.2m tonnes as of 31 March.

World sugar prices have been falling for the last couple of years following a series of bumper crops. This has hit Germany’s Südzucker, Europe’s biggest sugar producer, which issued a profit warning last week.

Returning to the trade data, while the goods trade deficit shrank in February, this reflected a drop in imports rather than an improvement in exports.

And the deficit widened by £100m the three months to February.

The ONS said movements in goods exports were largely offset by imports, therefore there was little change in the goods deficit with EU or non-EU countries, which widened by £200m and narrowed by £100m respectively in the three months to February 2018.

The detail of the manufacturing data reveals that seven of 13 manufacturing sub-sectors declined in March, led by machinery and equipment, down 3.9%, the first fall since last June.

Of the sub-sectors that upped their factory output in February, the weapons and ammunition industry stood out – output rose 28.6%, its strongest growth since August 2014.

Pharmaceuticals were also up, by 3.3%.

The UK data are out. Manufacturing output fell unexpectedly in February, posting its first drop in almost a year, according to official figures. It fell 0.2% in February from the previous month and stagnated in January.

The Office for National Statistics also reported another sharp drop in construction output of 1.6%, defying hopes of a small rebound after January’s 3.1% slump.

The figures suggest the UK economy may have slowed in the first quarter.