Global woes dent UK manufacturing sector with further pain forecast

Growth in Britain’s manufacturing sector cooled further last month to a two-year-low as concerns over the global economy and raw material shortages impacted new orders, with further pain predicted.

The closely watched S&P Global/Cips UK manufacturing PMI (purchasing managers’ index) recorded a reading of 52.8 in June, down from 54.6 in May. Any reading above 50 denotes growth, however the latest score fell below expectations from a preliminary 53.4 reading from flash figures last week.

Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing output growth ground to a near standstill in June, as intakes of new work contracted for the first time since January 2021.

“Domestic market conditions became increasingly difficult and foreign demand fell sharply again, stifled by Brexit, transport disruption, the war in Ukraine and a global economic slowdown.”

The latest survey showed that the consumer goods sector was among the worst affected by the decline in new orders. In contrast, investment goods producers saw new work lift for the fifth consecutive month.

Total new export orders contracted for the fifth month in a row, driven by the slowdown in China, the conflict in Ukraine and general economic uncertainty.

Some firms also highlighted that ongoing Brexit-related disruption and weaker growth has impacted new demand from the EU.

Mike Thornton, national head of manufacturing at accountancy and business advisory firm RSM UK, said: “The backlog of work continues to drive much of the sector’s output, as a result of the pent-up demand for goods and reinvigorated production post-pandemic.

Experts noted that UK manufacturing output growth ground to a near standstill in June, as intakes of new work contracted for the first time since January 2021. Picture: Owen Humphreys/PA Wire

“However, with future output declining from 72.1 to 67.9, and new orders falling from 50.3 to 49.6, the data shows concerning trends which suggest that manufacturers are currently sustaining activity through tackling their backlog of work.”

Thomas Pugh, economist at RSM UK, added: “Even though the headline index only ticked down, a more worrying picture emerges when we look at the data in more detail. The decline in both the new orders index and the future output index suggest that output will deteriorate over the next few months.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (Cips), said: “Supply chain managers reported that ports and paperwork were their undoing in June with Brexit a thorn in the side of manufacturers combined with weaker domestic demand, inefficient performance in supply chains and an overall shaky UK economy.”

Business confidence among firms dropped to its lowest since May 2020, as the proportion of firms expecting production levels to grow over the next year dropped to 47 per cent.

Fhaheen Khan, senior economist at Make UK, said: “Today’s figure is nothing if not expected as inflation ebbs the sector’s growth away from recovery. Production and levels of new work are starting to fall and will likely continue in this direction until economic conditions improve.

“Up until now strong demand has been the saving grace of industry, but this can only go on for so long before consumers and businesses have had their fill, or be priced out of the market due to inflation.”