2012.07.2303:11:00UTC+00UK Manufacturing Sector Set To Contract This Year: EEF

The British manufacturing sector is likely to contract this year as as the economic turbulence in the Eurozone continues affect trade and exports, a report published by manufacturers' organization Engineering Employers' Federation (EEF) showed Monday.

EEF expects manufacturing output to decline 0.3 percent in 2012, faster than the 0.1 percent fall forecast earlier. It will mark the first contraction in three years.

However, in a scenario where the Eurozone breaks up following a possible Greek exit the knock-on impact on UK manufacturing would be a drop in output of 1.3 percent in 2012 and 4.6 percent in 2013, the report said.

The British economy is estimated to grow a modest 0.2 percent this year, while the heightened uncertainty in the economy is likely to continue beyond 2012.

Some stability should return in the second half of this year leading to a resumption of modest quarterly growth in GDP, whilst manufacturing activity should step up a gear as we enter 2013, the report said.

"The estimate for second quarter growth is again unlikely to flatter the UK's economic performance," EEF Chief Economist Lee Hopley said. "But the bigger question is where we go from here. Our forecast scenarios show the importance of bringing greater confidence and certainty to the private sector."