London Olympics hits UK manufacturing – analysts

Reuters / Stefan Wermuth
In July UK manufacturing activity declined at the fastest pace since May 2009 at the height of financial crisis. Analysts are putting it partly down to the London Olympics effect.

The UK manufacturing Purchasing Managers' Index (PMI) fell to 45.4 points from 48.4 in June, according to the study prepared by the Markit research group. Output and new orders both shrank sharply during July, as companies faced weaker demand at home and abroadю

Some British economists have suggested the Olympics affected the performance of the country’s manufacturers.

“It's possible there's been some Olympics-related disruption in early summer,” Ross Walker from Royal Bank of Scotland told the Daily Telegraph. “There was always a bit of a downside risk in terms of the Olympics with earlier shutdowns and disruption to supply chains, but this is still a bigger slowdown than anyone expected.”

Meanwhile other experts suggest the Olympics couldn’t cause such a significant drop in factory activity. “If you're an optimist, you might then think perhaps there may have been some pre-Olympic factory shutdown, but we can't really tell,” said Tom Vosa from National Australia Bank.  “It does look as if we are slightly re-entering recession territory,” he added.

On the other side, unemployment in the UK fell to a record level in July. The Office for National Statistics said the total number of jobless dropped by 65,000 to 2.58 million in the quarter to May, the lowest for almost a year. The biggest falls in unemployment, and increase in work, was in London, suggesting the Games are having an impact on the figures.