UK manufacturing contracts as “deep unease” takes hold

Manufacturing activity in the United Kingdom has contracted for the first time in three years, according to data from Markit.

UK manufacturing contracts as “deep unease” takes hold

The Purchasing Managers Index for the UK dropped to 49.2 in April from 50.7 in March. Readings above 50 indicate expansion, with those below 50 meaning activity has contracted.

The fall seems to reflect the delaying of purchasing decisions until after the 23 June referendum on the UK’s European Union membership.

Markit said the index was dragged lower by lacklustre trends in production and new orders and declines in both employment and stocks of purchases.

“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,” said Rob Dobson, senior economist at Markit. “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,” Dobson continued. “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 CEO at the Chartered Institute of Procurement & Supply talked of “deep unease” among his members. 

“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,” Noble said. “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," he added. "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.” 

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Alex Sebastian

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Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.



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