George Osborne just got dealt a blow ahead of Wednesday's budget

Britain's Chancellor of the Exchequer George Osborne arrives at an European Union finance ministers meeting in Luxembourg, June 19, 2015.REUTERS/Francois LenoirBritain’s Chancellor of the Exchequer George Osborne arrives at an European Union finance ministers meeting in Luxembourg, June 19, 2015.

The UK’s manufacturing sector — everything from car makers to little shops making their own bags — is in a much worse state than economists expected.

Latest figures from the government show the sector contracted by 0.6% in May compared to the month before, when the manufacturing industry shrunk by 0.4%. Analysts had forecast a return to growth, with a mild rise of 0.1%.

Manufacturing also disappointed when compared to May last year. While the sector has grown 1% since then, that’s below economists forecasts of 1.8% growth.

It’s a blow for Chancellor George Osborne, who has repeatedly promised to kickstart UK manufacturing as part of plans to “re-balance” the economy away from the finance and service industries.

In his 2011 Budget Osborne said he wanted to kickstart a “march of makers.” That idea has been echoed ever since — the Chancellor said last year’s Budget was for “makers, doers and savers.”

But despite all the talk, Osborne has failed to move the dial much. The graph below shows the growth or contraction of the manufacturing sector since Osborne became Chancellor in 2010. Anything above 0 indicates growth, below shrinking.

Manufacturing growth month on month UKFXstreet.comMonth-on-month growth in UK manufacturing since 2010.

As you can see, it’s been pretty much flat, with any monthly increase normally followed by an equal decrease a month later. The last few months have also been trending downward.

Industrial production — which is manufacturing plus utilities, energy and mining — has been faring slightly better. Today’s figures beat expectations, growing 2.1% on last year, compared to forecasts of 1.6%, and up 0.4% on April, against expectations of a 0.2% decrease.

But it’s still nowhere near Osborne’s vision of a “Northern Powerhouse” underpinned by a manufacturing backbone. It will be interesting to say what, if anything, Osborne says about manufacturing and “makers” in tomorrow’s budget.

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