British industry is struggling and the Brexit effect hasn't even hit yet

UK manufacturing and industrial production data came in ahead of expectations for May, with both figures a big beat on the forecasts of economists.

It might look good but but both fell from a strong base in April. And that’s before accounting for the potential crash as a result of the UK’s vote to leave the European Union in June.

According to the latest figures from the Office of National Statistics, released on Thursday, industrial production fell by 0.5% in May — the most recent data period. That’s way, way below the 2% growth seen in April, but a beat on the expected 0.9% fall.

Manufacturing production also beat expectations, falling 0.5% as well, against the same 0.9% fall forecast. Once again, it was a huge drop from April, when the reading came in at 2.3%.

On a year-on-year basis, both numbers were also big beats, with industrial production growing 1.2% against forecasts of a 0.5% rise. Manufacturing grew 1.7% y-o-y. It was expected to grow just 0.8%.

Here’s the ONS’ chart showing May’s slip as part of the longer term trend.

Although numbers were better than expected, and April’s base was unusually high because of a cold snap. The numbers are worrying, largely because they were taken prior to the UK’s vote to leave the European Union, and as a result don’t reflect the hit to UK industry from Brexit. That impact won’t be seen in ONS figures until September, when July’s figures are released.

Earlier in July, Markit warned that the European manufacturing sector will take a huge hit as a result of the referendum, and similar, probably worse, consequences are likely in the UK.

“Given the uncertainty caused by the prospect of Brexit, it seems likely that business and consumer spending will be adversely affected across the euro area in the short term at least, pulling growth down in coming months,” Markit’s chief economist Chris Williamson said.

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