UK manufacturing output slumps to seven-year low as Brexit uncertainty stifles demand

‘Creeping dread’ descends on sector as Britain’s exit from EU looms

Manufacturing slumped to a seven-year low in the UK in August
Manufacturing slumped to a seven-year low in the UK in August

The UK’s manufacturing output slumped to a seven-year low last month as uncertainty over Brexit and a global economic downturn hurt demand, the latest snapshot survey has found.

The sector shrank at the fastest rate since 2012 in August, the fourth consecutive month of contraction, according to the closely watched IHS Markit/CIPS purchasing managers index (PMI).

The index fell to 47.4 last month, down from 48 in July. Any reading below 50 indicates decline.

IHS Markit, which compiles the monthly survey, said production had been stifled by “political uncertainty” and “global trade tensions”.

New orders fell steeply across consumer goods industries, with manufacturers linking the slump to weaker domestic and global economic conditions, low market confidence, and Brexit concerns.

The amount of export trade also fell at the fastest rate for seven years, with some firms reporting that EU-based clients were “routeing supply chains away from the UK” due to Brexit. New orders from the US and Asia also fell.

Business optimism was at its lowest last month since July 2012, when the survey began monitoring expectations of future output.

However, manufacturers said they still expected to see some output growth in the coming year, with 40 per cent of firms forecasting expansion.

Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said companies had resorted to job cuts and price increases “as a last-ditch effort against a renewed pressure from a weakening pound”.

He added: “The sector’s illness took a turn for the worse in August with the sharpest decline in domestic and export orders for seven years. Investment continued to peter out and heightened concerns about the UK’s political situation and the strength of the global economy acted as a drag on activity.

“As Brexit planning intensifies, some firms were resorting to more inventory building whilst others were unravelling their stocks. With some supplies impacted by port delays and poor supplier performance, a creeping dread is descending on the sector that there will be more of these obstacles to come.”

Rob Dobson, director at IHS Markit, said: “The current high degree of market uncertainty, both at home and abroad, and currency volatility will need to reduce significantly if UK manufacturing is to make any positive strides towards recovery in the coming months.”

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