Manufacturing sheds jobs for the first time in two years

Weak exports and declining investment in the oil and gas sector have taken a toll on companies

The woes of manufacturers extended into September with employers shedding jobs for the first time in two and a half years, according to the latest sector survey snapshot.

The Markit/Cips purchasing managers’ index eased to 51.5 for the month, down slightly from 51.6 in August. This was still just in the 50-plus territory signalling expansion, but the performance was described as “an ongoing malaise” by Markit’s senior economist Rob Dobson.

“The UK manufacturing sector remained sluggish at the end of the third quarter, stunned by a triple combination of a sharp slowdown in consumer spending, weak business investment and stagnating export order inflows.”

The job cuts, Mr Dobson added, “send a signal that manufacturers are becoming more cautious about the future, which may lead to a further scaling back of production at some firms in the coming months”.

Zach Witton at the EEF manufacturers’ organisation said weak exports and declining investment in the oil and gas sector were taking a toll on companies. He warned that even domestic demand, which has supported output in recent months, is showing signs of weakness. “Overall, until we see an improvement in export markets, manufacturing will remain under pressure.”

The Office for National Statistics (ONS) said this week that UK GDP is now 5.9 per cent above its pre-financial crisis peak. But manufacturing output remains 5.5 per cent below its level on the eve of the 2008-09 recession.

There was, however, better news on productivity, with the ONS reporting that output per hour in the second quarter rose 0.9 per cent – the fastest rate of growth since the second quarter of 2011. This was hailed by some analysts as a sign that UK productivity, which has flatlined since the financial crisis, is picking up. “These statistics prove that British businesses are finally starting to put the pieces of the productivity puzzle back together again,” said James Sproule of the Institute of Directors.