UK growth continues as bank raises interest rates

13 November 2003
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13 November 2003 | David Arminas

Britain's manufacturing industry continued its recent recovery in October, with output and new orders strengthening, as the sector enjoyed the fastest growth since December 1999.

The purchasing managers' index (PMI), published by CIPS and Reuters, rose to 54.2, to remain above the 50 figure that indicates no change on the previous month.

The UK construction sector also performed strongly again during October, expanding for the fifty-seventh month and at the fastest rate since July 2001.

The PMI reported a rise to 58.9, from 56.9 in September. The housing activity index rose to 64.9, as low interest rates and strong demand for new homes kept house-builders busy.

Both breathed a sigh of relief when the Bank of England nudged up interest rates last week by only a quarter-point to 3.75 per cent.

Despite optimism over the October figures, manufacturers remain concerned over narrow margins and the constant pressure to stay focused on efficiency.

The rate rise was a bid to cool the housing market and dampen growing consumer debt.

But both the Confederation of British Industry and the British Chambers of Commerce cautioned that it should not be part of a constant upward trend.

Despite the threat of further rate rises, building companies are confident that levels of activity will be maintained for at least a year.

In addition, the services sector recorded its fastest expansion since November 1999. The business activity index rose to 59.1 from 58.7 in September as new orders increased.


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