The United Kingdom has fallen out of the top ten global manufacturing countries, a position it had held for decades, according to The Times. The latest data for 2022 shows the UK ranked 12th, down from 8th in 2021.

The UK was pushed out of the top ten by Russia and Mexico, which climbed to eight and seventh positions respectively, driven by increased defence production in Russia and Chinese investments in Mexico.

According to Make UK CEO Stephen Phipson, whose firm surveys manufacturing, the UK is the only country that does not have a national manufacturing plan, while global industry leaders are drawing up one for the long term.

As bne IntelliNews reported, China is the most powerful manufacturing nation in the world and Russia is the most powerful in Europe.

UK decline is part of a broader pattern of the decline of European economies that are being increasingly overtaken by emerging markets, and by Russia in particular. Russia has overtaken Japan to become the fourth largest economy in the world, according to the World Bank in PPP (purchase power parity) terms.

Despite the extreme sanctions regime, Russia’s economy is flourishing, according to the latest Central Bank of Russia (CBR)’s macroeconomic survey, and on track to put in more than 3% of growth in 2024 for the second year in row, and the economy is estimated to have grown by more than 5% in the first quarter of this year.

By contrast, the UK economy increased by 0.6% in the first quarter of this year, following declines of 0.3% in 4Q23 and 0.1% in 3Q23. Real GDP growth is now forecast at 0.7% in 2024, a slight upgrade from the 0.5% in the April, according to the World Economic Outlook (WEO).

Eurozone on the edge of recession

The news comes as the eurozone's manufacturing sector also faces challenges. The sanctions on Russia were imposed so as to bring its economy to its knees, but increasingly they have bounced back on Europe in a boomerang effect that has hurt Europe more than Russia. The Eurozone’s Purchasing Managers' Index (PMI) fell to a seven-month low of 45.6 in July, while Russia’s manufacturing PMI remains robust and well above the 50 no-change benchmark, although the services sector growth has slowed.

Germany saw its PMI drop to a three-month low of 42.6, while France's index fell to 44.1, marking a second consecutive month of decline.

Eurozone June loans data also continued paint a bleak picture, both for households and non-financial corporations, indicating that the pace of the recovery for investment will be gradual, Oxford Economics reported last week.

Adjusted loans to Eurozone households saw a monthly flow of €4bn after having remained stable at €3bn in May, resulting in 0.3% growth over the year, the same as the previous month. Lending for mortgages improved, but credit for consumption stalled.

Lending flows to non-financial corporations came in at €19bn after they picked up by €5bn in May, which meant adjusted loans grew 0.7% y/y. But the devil is in the detail, as all the improvement can be ascribed to loans of maturity up to one year, which tend mostly to reflect liquidity and inventory financing needs. Longer-maturity loans, which are typically associated with longer-term investment, contracted for a second consecutive month.

By contrast, CBR has upgraded its outlook on growth of retail and corporate lending for 2024, keeping mortgage lending outlook intact, according to the regulator’s updated mid-term forecast. In particular, the outlook on growth of lending for 2024 has been upgraded to 10-15% from 8-13% in the corporate segment and to 10-15% from 7-12% in the retail segment.

The outlook for Europe’s industry is equally grim, led by the spluttering German economy. Germany’s industrial output fell 0.2% month on month in May. This comes after a 0.3% rise in April and short of what the turnover data would have suggested.

“The discrepancy is likely due to energy dragging down the headline number, with the index excluding it edging up 0.2%. However, consumer and intermediate goods also posted contractions, whilst capital goods was the only main category advancing. Noteworthy are the sizeable decline in pharmaceuticals but the healthy growth in transport equipment,” Oxford Economics reports.

“In Germany, the IFO business climate failed to improve and fell to 87 from an already soft 88.6 from June's 88.6. Although the current conditions subindex remained flat at its low level, the expectations component fell, casting doubts on the confidence about the recovery. The worsening was broad-based across sectors,” Oxford Economics said in a note.

Most of the leading economic surveys for Europe also point to a decline or stagnation.