UK manufacturing plunges into decline after Brexit stockpiling drive ends
Manufacturers reported lower demand from Asia and Europe, with EU demand sliding as ‘clients divert supply chains away from the UK’.
Britain’s manufacturing sector plunged into decline for the first time in almost three years in May as the stockpiling push driven by no-deal Brexit preparations came to a halt.
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The IHS Markit/CIPS UK manufacturing purchasing managers’ index (PMI) showed a reading of 49.4 last month, down from 53.1 in May.
The figure slid below 50, the marker which indicates growth, for the first time since July 2016.
It fell significantly below economists’ predictions, with a consensus of 52 estimated this weekend.
Large inventories prior to the original March Brexit deadline meant that “manufacturers reported increased difficulties in convincing clients to commit to new contracts during May”, the PMI report said.
The total volume of new business orders fell for the first time in seven months.
New export business also declined for the second month running, and at the quickest rate in more than four years.
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Manufacturers reported lower demand from Asia and Europe, with EU demand sliding as “clients divert supply chains away from the UK”, it said.
The downturn in new orders weighed on output and employment during the month, with manufacturing employment falling for the second consecutive month.
The consumer goods sector however remained strong during the period, reporting increases in output, new business and staff numbers.
It has now become obvious that the stockpiling activities of the last few months were propping up the sector’s performance Duncan Brock, Chartered Institute of Procurement and Supply
Rob Dobson, director at IHS Markit, said: “The UK manufacturing sector was buffeted by ongoing Brexit uncertainty again in May.
“The trend in output weakened and, based on its relationship with official ONS data, is pointing to a renewed downturn of production.”
Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said: “Concern for manufacturers has deepened this month as the sector’s performance shrank in May and tumbled into contraction.
“Supply chain managers voiced their deep anxieties over Brexit’s continuing impacts as some supply chains were redirected away from the UK, resulting in a drop in total new orders for the first time since October.
“It has now become obvious that the stockpiling activities of the last few months were propping up the sector’s performance.”