UK manufacturing suffers shock 0.8pc fall in July

The total trade deficit also quadrupled to £3.4bn in July as Britain's economy began the third quarter firmly on the back foot.

The double whammy prompted experts to downgrade their quarterly gross domestic product (GDP) growth predictions.

Most economists had expected the manufacturing sector to grow by 0.2pc month-on-month in July, but figures released today revealed a 0.8pc slump - the biggest fall since May 2014.

It means manufacturing activity is now 0.5pc lower than it was a year earlier, its first annual drop since August 2013.

The Office for National Statistics (ONS) said the drop in July was mainly due to falls in manufacturing of basic metals and metal products, as well as transport equipment.

The latest slump dragged overall industrial production, which includes energy supply industries and mining and quarrying, down by 0.4pc compared to the previous month, although it is still up 0.8% on a year ago.

Howard Archer, chief UK economist at IHS Global Insight, said: 'It is evident that manufacturers are currently being particularly constrained by weakened foreign orders, which is at least partly a consequence of sterling's strength against the euro.

'In fact, sterling has hit a new seven-and-a-half high on its trade-weighted index this week.'

Mr Archer added that Britain's growth forecast of 0.6pc for the third quarter might now need to be revised downwards as a result.

'There is now a serious risk that growth could dip to 0.5pc quarter-on-quarter or even lower,' he warned.

On July's manufacturing figures, ONS chief economist Joe Grice said: 'The biggest single factor in the fall in manufacturing output was motor vehicle production, with the summer shut-downs appearing to start earlier than usual, along with anecdotal evidence showing a slowdown in exports. There has also been a fallback in the manufacture of weapons, following a big rise in June.'