UK manufacturing growth slowed sharply in October to its weakest pace in 27 months, a survey reveals, fuelling fears over the impact of Brexit.
The survey, published yesterday by the Chartered Institute of Procurement & Supply, also shows that new orders and employment in the UK manufacturing sector fell for the first time in 27 months during October. CIPS highlighted weak demand for vehicles. CIPS’s purchasing managers’ index for UK manufacturing, which measures changes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased, dropped from 53.6 in September to 51.1 last month on a seasonally adjusted basis.
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Rob Dobson, director at survey compiler IHS Markit, said: “October saw a worrying turnaround in the performance of the UK manufacturing sector. At current levels, the survey indicates that factory output could contract in the fourth quarter, dropping by 0.2 per cent. New orders and employment both fell for the first time since the Brexit vote [aftermath] as domestic and overseas demand were hit by a combination of Brexit uncertainties, rising global trade tensions and especially weak demand for autos.”
CIPS said staffing levels rose last month at small and medium-sized manufacturers, but fell for the third straight month at large companies in the sector.
It added: “Where job losses were reported, this was linked to the decline in new work received, staff reorganisations, redundancies and efforts to control costs.”
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The survey shows that overseas demand for UK manufacturers’ products fell for the second time in three months in October.
CIPS director Duncan Brock said: “Overall activity was marred by a drop in export orders and continuing weak domestic demand as Brexit took another bite out of client confidence. To see inflows of new orders’ first decline since the middle of 2016, following the [European Union membership] referendum, will send shivers down the spine of business. Any hope that the current situation would not continue to impact has surely now evaporated. Employment was also affected, with lower levels of hiring, as companies tried to control their costs. Job-seekers will find the hiring landscape less friendly during the run-up to departure.”
Justin Benson, head of automotive in the UK at accountancy firm KPMG, said: “With the UK manufacturing PMI for October dropping by 2.5 points, it suggests that business confidence is on a downward trend. Combine that with Brexit, trade negotiations between the US and China, German elections and Italian debt, the picture it paints is one of increased geopolitical uncertainty.
“With this PMI downturn and the last two quarters of negative investment growth, the industry needs to get investing again.”
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Mr Dobson said: “Looking ahead, manufacturers still maintain a positive outlook for production over the coming year, with 48% forecasting expansion. That said, the second half of the year so far has also seen confidence remain low compared to its long-run average, with views on prospects darkening again in October amid rising Brexit-related uncertainties and escalating global trade tensions.”
Mr Brock said: “Optimism remained relatively buoyant for the coming year. It’s the medium-term outlook that looks bleak unless the Brexit negotiations bring some certainty, ending this eternal waiting game.”
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