UK manufacturing PMI reaches record high in May

The UK's manufacturing sector is growing at a rate not seen for decades, after pent-up demand was released by easing Covid-19 restrictions.

The IHS Markit/Cips Manufacturing Purchasing Managers' Index (PMI), which is a closely watched sign of the sector's fortunes, reached a record high last month, according to the most recent figures.

It rose to a score of 65.6 in May, the best score in the survey's history dating back nearly three decades, from 60.9 in April.

IHS director Rob Dobson said: "The UK PMI surged to an unprecedented high in May, as record growth of new orders and employment supported one of the steepest increases in production volumes in the near 30-year survey history.

Last month saw one of the steepest increases in production volumes in the survey's near 30-year history. Picture: Ben Stansall/AFP via Getty Images.

"Growth is being boosted by the unlocking of economies from Covid restrictions and ongoing vaccination programmes. This is being felt across the globe, as highlighted by a record rise in new export business during the latest survey month."

But the survey also came with a warning over prices. Many suppliers are struggling to keep up with the increased demand, pushing up the average delivery times to manufacturers to one of the highest levels seen in the survey's history.

Businesses particularly highlighted shortages of electronics, plastics and metals, and there were also delays in transport. This led to the highest rise in the cost of supplies since the survey began in 1992, causing manufacturers to increase their own prices.

Simon Jonsson, head of industrial products at KPMG UK, said: "Confidence is high among manufacturers as demand continues to soar but there's a danger that many are only seeing the weather in front of them.

"Our closest European neighbours – France and Germany – are also witnessing similar levels of demand for their products. Supply chain bottlenecks are now starting to appear in Germany and fingers are crossed we will not see the same elsewhere."

New export orders rose at record pace in May, with demand strong from the EU, the US and China. However the survey's authors said this gain seems to be overwhelmingly helping big companies, while smaller firms saw a "comparatively mild" rise.

Record

Also commenting was Howard Archer, chief economic advisor to the EY Item Club, who said: “The purchasing managers survey pointed to the manufacturing sector expanding at a record rate in May.”

He noted, for example, that new orders grew at a record rate. “Markit said that companies linked new order growth to rising business confidence, the further re-opening of the UK economy and reduced issues relating to Covid-19.

“While domestic demand improved markedly, there was also a record rise in foreign orders. Employment also rose at a record rate in May, adding to recent encouraging news on the UK labour market.

“Confidence in future business rose to the highest level since the series started in July 2012. However, there are ongoing concerns about supply chain delays among manufacturers

“Input costs rose at a record rate. This was due to strong demand for manufacturing inputs, higher transport bills and a spike in commodity prices. This led to output prices also rising at a record rate.”

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