‘Deep unease’ building in UK manufacturing

The UK’s manufacturing activity fell in April for the first time since March 2013.

The weakening performance has mainly affected the consumer and investment goods sectors, which have both reported declines in production and new work received.

A recent survey from the Markit/CIPS (Chartered Institute of Procurement & Supply) UK Manufacturing PMI (Purchasing Manufacturers Index) found that the looming EU referendum has seen some clients delay spending, with the declines attributed to slower growth of domestic demand and a reduction in new business from overseas.

New export orders saw a marginal fall in April as global economic growth continued to slow.

This downturn has also been reflected in the labour market, with job cuts reported for the fourth consecutive month. This was the fastest decline rate since February 2013.

Job losses were mainly seen in large-sized companies, with SME’s reporting further increases in workforce numbers.

Rob Dobson, senior economist at Markit, said: “The UK manufacturing PMI fell below its critical 50.0 mark for the first time in over three years in April, highlighting a further deepening of the sector’s downturn at the start of the second quarter.

“On this evidence manufacturing production is now falling at a quarterly pace of around 1%, and will likely act as a drag on the economy again during the second quarter and putting greater pressure on the service sector to sustain GDP growth. The manufacturing labour market is also being impacted, with the data signalling close to 20,000 job losses over the past three months.

“Manufacturers are emphasising slower domestic demand growth and declining new export orders as the key weaknesses they are facing, amid rising uncertainty about the global economy, the oil & gas industry, retail sector and the EU referendum. With this backdrop unlikely to change in the coming months, the second quarter is likely to remain a bleak landscape for industry.”

David Noble, Group chief executive officer at the CIPS, said: “Recent fears over a stall in the UK’s manufacturing sector have now become a reality and driven the steepest decline in the manufacturing PMI for three years. An atmosphere of deep unease is building throughout the manufacturing supply chain, eating away at new orders, reducing British exports and putting more jobs at risk.

“A sense of apprehension across the sector is being caused by enduring volatility in the oil and gas industry, falling retailer confidence and the uncertainty created by the EU referendum. In a month that saw the collapse of BHS, the troubles in the British High Street are being felt just as keenly in Britain’s factories. Manufacturers are compensating for stalling new order growth by depleting their stocks, and dramatically cutting the amount of raw materials they buy from suppliers.

“Manufacturing jobs are under pressure, with the sharpest overall decline in employment since February 2013. The sector is nervously waiting to see whether this is a temporary blip or the beginning of a more pervasive slow down. For their part, suppliers are taking up the challenge, cutting delivery times for the first time since May 2013, but they are already feeling the pinch from falling prices. We are in for a nervous few months for the manufacturing industry.”

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