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Manufacturing Sector Suffers Worst Month Since February 2013

Written by: Keith Tully

Published: 1st July 2019

Workers on a machineThe UK’s manufacturing sector contracted at its sharpest pace in more than six years during June, according to the latest figures on output within the industry.

IHS Markit and the CIPS’ manufacturing purchasing managers’ index (PMI) recorded a reading of 48, with anything below 50 reflecting a contraction in activity as opposed to an expansion.

Such a sharp shrinking of the manufacturing sector has not been recorded since February 2013 and the figures have raised concerns about prospects for the wider UK economy this year.

A key reason cited to explain the downturn among manufacturers in recent weeks is the unusual jump in activity earlier this year due to widespread stockpiling efforts untaken at factories across the country amid fears of a No Deal Brexit.

There was a very clear spike in activity at factories nationwide in the weeks leading up to the end of March when the UK had been scheduled to leave the European Union.

Other issues believed to have contributed to the contraction of the sector include a reduction in exports due to a global economic downturn.

The June fall in manufacturing output comes directly after a contraction was recorded by the IHS Markit PMI during May to make it back-to-back months of decline.

Employers within the manufacturing sector have been cutting jobs consistently over the course of the second quarter of this year, according to the latest data.

“The impact of firms unwinding stockpiles built before the original Brexit date continued to reverberate through the sector and exacerbate weak demand,” explained Rob Dobson, a director at IHS Makrit.

“The stranglehold of sustained Brexit-related uncertainty and disruption also weighed heavily on business confidence and employment, as optimism ebbed to one of its lowest levels in the survey history and staff headcounts were reduced for the third straight month.”

A separate economic report from the British Chambers of Commerce (BCC) has described economic conditions in the UK during the second quarter of this year as having “remained stagnant”.

The BCC says that “relentless Brexit uncertainty, rising business costs and tougher global trading conditions” have all taken their toll on activity within the UK economy in recent weeks and months.

Keith Tully

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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