UK manufacturing has worst month for two and a half years

manufacturing  A worker cuts newly manufactured bars of steel at the United Cast Bar Group's foundry in Chesterfield, Britain, April 12, 2022. Picture taken April 12, 2022. REUTERS/Phil Noble     TPX IMAGES OF THE DAY
UK manufacturing decline accelerates as difficult year looms. Photo: Phil Noble/Reuters

Manufacturing in the UK ended 2022 with its worst month for over two and a half years, according to the S&P Global/CIPS UK Manufacturing PMI survey.

Companies saw falls in output, numbers of new orders received and stocks, while prices continued to rise, although at a slower rate than before.

The S&P Global/CIPS UK Manufacturing PMI scored 45.3 in December, down from 46.5 in November, figures released on Tuesday show. Scores below 50 are considered to show that the sector is shrinking.

Excluding the lows registered during the first pandemic lockdown, the PMI reading is one of the weakest since mid-2009.

Production fell for the sixth consecutive survey as some companies also mentioned shipping delays, higher costs and other issues all linked to Brexit.

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“All these black spots managed to overshadow some of the improvements for manufacturers such as a further easing in supply-chain delays or the higher rates of activity in the investment goods sector or input price inflation easing to a two-year low,” John Glen, chief economist at the Chartered Institute of Procurement & Supply, said.

“The overarching concerns remain that there is little power in the UK economy's engine of growth for 2023 and manufacturers were painfully aware of this as business expectations remained at historically low levels again,” he added.

Exporters reported low demand from China, the US, mainland Europe and Ireland, largely due to weak economic conditions around the world.

The pressure on the sector continued to impact staff, as the number of people employed by manufacturers dropped for the third month in a row. It was the steepest fall since October 2020.

“Clients are increasingly downbeat and reluctant to commit to new contracts, not just in the UK but also in key markets like the US, China and the EU,” Rob Dobson, director at S&P Global Market Intelligence, said.

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“The weakness in the latter is still being exacerbated by the constraints of Brexit, as higher costs, administrative burdens and shipping delays encourage increasing numbers of clients to shun trade with the UK.”

The PMI is compiled from responses to surveys sent to purchasing managers' at around 650 manufacturers in the UK, with data collected between December 6 and 20.

Maddie Walker, Industry X lead for Accenture in the UK, said: “A continued downturn in manufacturing ends the year on a disappointing note, with rising costs and deteriorating demand delivering another blow. With customers feeling the sting of inflation, muted sales in the Christmas trading period will weaken confidence and a fall in orders may put a brake on further production in the months ahead.

"However, we know that manufacturers have become experts at resilience. We expect to see more use of productivity and process improvement programmes to improve operational efficiency as we move into the new year.”

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