EY hires Penney Frohling to lead UK Financial Services Strategy practice

14 February 2014

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  • PMI numbers suggest continued strength in Q1
  • Increasingly positive signs for UK investment
  • Employment in manufacturing continues to grow strongly

Andrew Goodwin senior economic adviser to the EY ITEM Club, comments on the PMI manufacturing and lending figures

“Today’s CIPS manufacturing survey data for February provided further upbeat signs for the health of the UK economy. The manufacturing PMI picked up slightly on its level in January, remaining well above its long-term average. What’s more, robust orders for investment goods and low levels of spare capacity suggest that the recovery in business investment seen at the end of last year is being sustained, and another strong quarter for capital spending can be expected in the early part of this year. Admittedly, the latest Bank of England data on lending in January (also released today) points to credit to firms continuing to fall. But the large cash piles that many firms have built up should provide the resources to fund further growth in investment.

“Continued strong demand for labour was another positive sign, suggesting that firms are increasingly optimistic about the economic outlook. Rising employment should support consumer confidence and spending power, sustaining the decent expansion in consumer spending seen in recent quarters.

"Yet, while growth in export orders remains in positive territory, adverse exchange rate movements appear to have dampened overseas demand slightly. However, rising demand in a number of the UK’s key trading partners should support export growth through 2014.

“That said, the path to a better balanced economy is far from clear. While not exactly pointing to a credit boom, January’s lending data from the Bank showed household borrowing continuing to rise, with mortgage approvals at a six year high. Set against a further fall in lending to firms, the recovery in credit remains highly skewed.”