UK manufacturers clawing back profits

Struggling British manufacturers are taking advantage of lower costs to claw back lost profits, official figures showed today.

Factory gate prices rose 3.1% in the year to February, although input costs have risen by 0.5% over the same period, the Office for National Statistics (ONS) said.

Jonathan Loynes of Capital Economics said: "Output price inflation remains more stubborn, suggesting that producers are using some of the easing in cost pressures to rebuild their battered profit margins.

"But with demand plummeting, they will have little choice but to cut prices soon."

Between January and February, input costs rose 0.6% after the biggest rise in crude oil prices since last June.

While crude prices rose, oil is priced in dollars and the weakness of sterling against the greenback made it even more expensive for UK refineries, the ONS said.

Overall output prices grew at a much lower rate of 0.1% over the month, with rises in petrol and food products partly offset by falls among other manufactured goods.