UK manufacturing rises to decade high thanks to reopening boom

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
British leader of the Labour Party, Sir Keir Starmer (right) tours Alstom, formerly Bombardier, train manufacturers during a visit on 4 March in Derby, England. Photo: Christopher Furlong/Getty Images
British leader of the Labour Party, Sir Keir Starmer (right) tours Alstom, formerly Bombardier, train manufacturers during a visit on 4 March in Derby, England. Photo: Christopher Furlong/Getty Images

UK manufacturing activity has rebounded to its highest level in a decade thanks to a reopening-driven boom.

Data specialists IHS Markit on Thursday said its proprietary survey of purchasing managers in the sector found a boom in new orders, output, and employment.

IHS Markit's closely-watched purchasing managers' index (PMI) scored 58.9 in March — a 121-month high and ahead of forecasts.

"Signs of Spring have appeared in the UK manufacturing sector, with the PMI hitting its highest level in a decade," said Rob Dobson, a director at IHS Markit. "Growth of output, order books and employment all gathered momentum and optimism about the year ahead improved further. 

"The domestic market remained the prime source of new orders, as companies reported that the vaccine roll-out and clients’ preparations for the loosening of lockdown restrictions underpinned the expansion."

It signals a remarkable turnaround for the sector after a Brexit-driven slump over Christmas. Dobson said international orders remained weak and manufacturers continued to face supply chain issues associated with new paperwork at the borders. 

WATCH: How to prevent getting into debt

READ MORE: Deliveroo IPO stock flop raises questions for Goldman and JP Morgan

"The extent to which supply chains have worsened through much of the past year has been unsurpassed during the near three-decade survey history," Dobson said.

Delays pushed up the price of parts and raw materials, which could "curb the strength of the upturn as the economy unlocks in the coming weeks and months," Dobson said.

"Reports of ongoing supply chain issues and shortages of materials have led to marked hikes in shipping costs, as manufacturers struggled to keep up with demand," said Sarah Banks, managing director of freight and logistics at Accenture Global.

“These figures indicate that many businesses are largely limited in their ability to respond to a modest increase in orders. As the economy rebounds, a sustained surge in demand for freight services and capacity will remain a challenge for months to come.”

The recent blockage of the Suez Canal — one of the world's busiest international trade routes — may lead to further delays.

"The reality of continued supply chain disruption as a result of Covid, Brexit and now the Suez delays could potentially rein back some of the gains in April," said Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which helped compile the survey.

WATCH: What is a budget deficit and why does it matter?