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Decline in oil and gas extraction hits output

UK industrial production tumbled by 1.7% in September, as North Sea oil and gas extraction plummeted and manufacturing output showed only marginal growth after tumbling 1.2% in August, official figures have revealed.

SPARKING A SETBACK: Maintenance work at a number of North Sea sites was blamed for low extraction rates of oil and gas. Picture: Martin Shields
SPARKING A SETBACK: Maintenance work at a number of North Sea sites was blamed for low extraction rates of oil and gas. Picture: Martin Shields

The seasonally-adjusted data, published yesterday by the Office for National Statistics, add to the picture of a UK economy which is still failing to show any convincing signs of meaningful underlying recovery amid the Westminster Coalition Government's austerity programme.

Oil and gas extraction tumbled by 20.9% during September, according to the ONS, its biggest monthly fall since comparable records began in 1997. The ONS highlighted the fact there was maintenance work at "a number of sites" in the North Sea in September.

Commenting on the impact of North Sea maintenance, the ONS said: "Although the 'summer' maintenance period for oil and gas extraction tends to be reasonably seasonal, the exact timing does vary from year to year. In the last five years, the months most commonly affected have been July and August but maintenance can also impact on June and September.

"The slightly unpredictable nature of the timing can sometimes give rise to volatility in the seasonally-adjusted series and this is one reason users are advised to take caution when interpreting monthly movements."

The drop in industrial production during September was much steeper than the 0.6% fall forecast by the City. Excluding June, which was affected by the Queen's Diamond Jubilee public holiday, it was the steepest monthly drop in industrial production since August 2009.

UK manufacturing output grew by only 0.1% month-on-month in September, one-third of the 0.3% rise projected by the City, failing to recover from August's sharp fall. September manufacturing output was down 1% on the same month of last year.

The ONS figures add to a slew of evidence that the manufacturing sector is struggling, and they cast further doubt on Chancellor George Osborne's vision of a "Britain carried aloft by the march of the makers".

Surveys from the Chartered Institute of Purchasing and Supply, compiled by financial information company Markit, have shown a sustained decline in UK manufacturing output in recent months.

A survey published two weeks ago by the Confederation of British Industry showed Scotland's manufacturing sector suffered a plunge in new orders and output in the latest three months, and was hit by renewed shedding of staff. This CBI Scotland survey highlighted the weakness of the UK economy, with the plunge in overall new orders resulting from a tumble in domestic business.

Samuel Tombs, UK economist at consultancy Capital Economics, said: "September's industrial production figures supported the latest CIPS/Markit activity surveys in suggesting that the economic recovery is quickly losing momentum again."

He added: "Admittedly, the drop (in industrial production) largely reflected a colossal 20% fall in output in the oil and gas sector. The ONS has suggested that this is due to the later timing of annual maintenance, which typically occurs in July and August. However, this implies that the recovery in production in July and August, which many interpreted as 'green shoots', partly also reflected temporary factors."

The ONS figures showed respective monthly rises in oil and gas extraction of 4.6%, 5.5% and 2.8% in June, July and August.

And Mr Tombs warned: "It seems increasingly likely that industry will be one of the key sectors prompting a renewed fall in GDP (gross domestic product) in Q4."

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