News Burst: Mobile phone slump hits UK economy

The pre-Christmas boom in mobile phone demand wanes, helping to drag UK manufacturing to a three-year low

A post-Christmas decline in consumer demand for mobile phones caused a sharp drop in Britain's manufacturing output in January, according to government figures released last Friday.

The index of production for January 2001, released last week by the government statistical arm, National Statistics showed a 0.9 percent decline in manufacturing output compared to December 2000 -- the biggest drop for nearly three and a half years. This was caused by a 4.8 percent fall in output from the electrical and optical equipment industries. National Statistics blamed this 4.8 percent drop on falling output from the optical networking and mobile phone manufacturers, after very high output in December.

Last Christmas was a success for the mobile phone sector, with each of the UK's four network providers reporting increases in subscriber numbers. However, there are concerns that the sector may be heading for a slump. Ericsson has decided to stop making its own mobile phones, and Motorola warned last month that lower-than-expected sales could push it into a loss in the first quarter of 2001.

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