UK manufacturing has the potential to recover, says BCC

• Manufacturing output in July 2012: +3.2% on the month, -0.5% on the year

Commenting on the manufacturing output figures for July, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

"It was widely expected that manufacturing output would recover in July after recording a large decline in June, but the increase was considerably larger than anticipated. However, longer-term trends in manufacturing are still disappointing, with output falling in year-on-year terms, and there is the prospect of a decline in 2012 as a whole. But the figures today reinforce the potential for the manufacturing sector to recover.

"During the recession many manufacturers have preserved their skill base by holding on to staff, but they are facing real challenges. As the government continues with steps to cut the deficit, and problems in the eurozone dampen export prospects, UK manufacturers, in line with businesses in other sectors, must adjust to a more difficult reality with weaker growth prospects.

"Nevertheless if the right policies are pursued by the government, steady progress can be made over the medium-term. More QE is not the most effective remedy to support the economy, instead the government should concentrate on aggressive deregulation, support for exports, infrastructure spending, and measures to ensure a revival of lending to businesses. This should be done both through the Funding for Lending scheme, and the implementation of a British Business Bank that can support growing businesses in manufacturing and other sectors for decades to come."