Stockpiling hits record high as manufacturers prepare for worst

‘The impact of Brexit preparations will reverberate through the manufacturing sector for some time to come,’ says IHS Markit director

However, manufacturers are already reporting concerns that future trends could be constrained (PA)

Stockpiling to prepare for Brexit caused a surge in the amount of goods held by UK factories, according to a survey.

Ahead of what was supposed to be the UK’s exit from the EU on 29 March, British manufacturers boosted output before the government asked the EU for an extension.

The closely watched IHS Markit/CIPS UK manufacturing purchasing managers’ index (PMI) rose to 55.1 last month from 52.1 in February.

A figure above 50 indicates growth. The poll has now been in positive territory for 32 months.

“Stocking of finished goods and input inventories surged to new survey-record highs,” said Rob Dobson, director at IHS Markit.

However he warned that the boost to manufacturing could be short-lived as companies sell off their stockpiles.

“Manufacturers are already reporting concerns that future trends could be constrained as inventory positions across the economy are unwound.

“The survey is also picking up signs that EU companies are switching away from sourcing inputs from UK firms as Brexit approaches.

“It looks as if the impact of Brexit preparations, and any missed opportunities and investments during this sustained period of uncertainty, will reverberate through the manufacturing sector for some time to come.”

Duncan Brock, of the Chartered Institute of Procurement & Supply, said that businesses will have to resort to “heavy discounting” on these stocks to free up valuable operating expenses if normal order levels are not restored in the coming months.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the rise in the manufacturing PMI largely reflected producers rushing to complete work before the Brexit deadline, rather than a strengthening of underlying demand.

He added: “We continue to doubt that precautionary stockpiling for a no-deal Brexit will boost GDP, because manufacturers primarily are buying imports and are tying up cash that otherwise might have been used for investment.

“All told, then, the PMI should not instil any confidence about the near-term outlook for the manufacturing sector.”