UK manufacturing shrinks as Bank of England issues stark warning

This morning’s UK manufacturing figures showed the fastest rate of decline for 18 months, as the Bank of England Governor Mervyn King warned of possible ‘extraordinarily serious’ climate ahead.

“Output is falling at the fastest rate since early 2009 as order inflows from domestic and overseas markets continue to deteriorate.”, said Rob Dobson, senior economist at Markit who carried out the manufacturing PMI survey. He added that the economic outlook was “darkening”, although Eurozone manufacturing fell sharply too.

Sterling fell this morning, and was not helped by Governor King’s comments that British banks should build up capital reserves in case of a worsening Eurozone crisis affecting UK liquidity. “Resolving these wider problems is beyond the control of any UK authority,” he added.

Tomorrow we have UK house prices, Eurozone PPI inflation, and key US labour market figures due out and all likely to affect exchange rates for sending money abroad.