Britain’s lopsided recovery continues

Hopes that Britain’s economic recovery will become less reliant on big-spending consumers ebbed further yesterday as data showed manufacturing growth weakened at the end of last year while lending to individuals soared.

Sterling hit a 16-month low after the Markit/CIPS UK Manufacturing Purchasing Managers’ Index, a closely watched monthly business survey, hit a three-month low in December.

Separate data from the Bank of England showed lending to consumers surged at its fastest rate in nearly a decade in the three months to November, and business lending showed signs of picking up despite a slowing housing market.

Taken together, the figures suggested Britain’s upturn — one of the strongest among advanced economies in 2014 — will remain biased towards consumption rather than other sources of growth such as investment and exports.

With a general election due in May in which the economy will take centre stage, signs of weaker manufacturing growth may concern finance minister George Osborne.

The long hoped-for economic rebalancing story is not playing out as envisaged, said James Knightley, economist at ING. “With employment and real household disposable income set to rise robustly in 2015, consumer spending looks set to become the UK’s main growth engine once again.”

While holding above the 50 threshold for growth, the manufacturing PMI fell to 52.5 from November’s 53.3. Growth in new factory orders also dropped to a three-month low and export orders stagnated.

For the fourth quarter, the PMI showed the weakest growth in a year-and-a-half — boding ill for official manufacturing data for the end of 2014.