British manufacturing companies had a good start to the year, managing to increasing output despite higher interest rates, while the UK trade gap continued to widen, official data showed on Wednesday.

Manufacturing output rose 0.2 per cent between December and January, surprising economists who had expected a slower pace of growth. The rise was driven by a significant increase in the pulp, paper and printing industries.

In the three months to January, the manufacturing sector grew 0.7 per cent compared with the previous three-month period. This not only reflects the strong January data but also some upward revisions to past figures.

The overall performance of all production industries was 0.6 per cent higher on the previous three months, with further growth held back by a fall in output by gas, electricity and water companies.

Philip Shaw at Investec said: “The manufacturing numbers show a fairly solid, unexciting gain on the month with some back revisions complicating the picture somewhat. The manufacturing sector is expanding, though obviously growth is below trend.”

He added that the data was unlikely to influence strongly the Bank of England’s monetary policy committee which is currently holding its March meeting. Hardly any economists expect the MPC to raise rates on Thursday but financial markets have pencilled in another hike from the current 4.75 per cent later this year.

The Office for National Statistics also said that Britain’s trade deficit had further deteriorated in January to £3.7bn from £3.5bn in December, which pushed down sterling in early morning trading.

The increase was driven by increased exports from non-European countries. The ONS added: “The latest estimate of the trend suggests that the UK trade deficit is worsening in recent months.”

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