British businesses have been given renewed hope that the economy is picking up, with manufacturing output rising and the trade gap falling during December 2011.
According to the Office for National Statistics (ONS), UK businesses increased production by one per cent during the final month of the year.
This took the sector into positive territory for the year as a whole, with 0.8 per cent growth recorded over 2011.
David Kern, chief economist at the British Chambers of Commerce (BCC), said the figures were stronger than expected and support its belief that the UK economy will avoid recession.
"The sector's overall performance has been relatively weak in recent months," he noted.
"However, the December upturn is positive as it comes in the face of a tough austerity programme at home, and difficult challenges facing UK exporters in the eurozone."
With UK manufacturing output increasing, the UK was able to further reduce the trade gap at the end of 2011.
The trade deficit in goods and services was down to £1.1 billion in December 2011, from £2.8 billion in November, meaning exports are gradually catching up with imports.
Indeed, the current gap is the smallest seen since April 2003 - something Mr Kern described as "a welcome development".
"While we should not give too much weight to one month’s figures, this also supports our view that a recession is unlikely," he commented.
"Although the re-balancing of the economy towards exports is moving slowly, it is reassuring that we are heading in the right direction."
Mr Kern said British exporters will face a challenge to keep their positions in international market, given the problems facing the world economy and the ongoing debt crisis in the eurozone.
"We now need to see a powerful national export drive with more support for businesses in areas such as trade finance, insurance and promotion," he added.
"While low interest rates and a competitive pound will help, more must be done to ensure that British firms can compete on equitable terms."
Mr Kern said every effort must now be made to build on the December improvement and strengthen business confidence.
The increase in quantitative easing from £275 billion to £325 billion should have a positive effect, he added.
"In the March Budget, we urge the Chancellor to announce meaningful steps that will empower businesses to create jobs and deliver growth," Mr Kern stated.
Posted by Dan Smith
