Manufacturing slumps as Brexit and trade tensions take toll

Output in Britain’s manufacturing sector slumped to its lowest level for more than two years in October as Brexit, trade tensions and weak demand for cars conspired to leave factories reeling.

Figures from the Markit/CIPS UK Manufacturing purchasing managers’ index (PMI) showed a reading of 51.1 last month, lower than the 53.6 in September.

A figure above 50 indicates growth, but economists were expecting a reading of 53 and output growth was the weakest since July 2016.

The survey indicated that the decline in manufacturing orders were linked to lower inflows of new work from overseas and softer growth of domestic demand.

The weakness in total new orders was mainly centred on the consumer goods sector.

Foreign demand decreased for the second time in the past three months during October and some companies reported that Brexit uncertainties had negatively affected inflows of new work from within the EU.

Rob Dobson, director at IHS Markit, which compiles the survey, said: “October saw a worrying turnaround in the performance of the UK manufacturing sector. At current levels, the survey indicates that factory output could contract in the fourth quarter, dropping by 0.2%.

“New orders and employment both fell for the first time since the Brexit vote as domestic and overseas demand were hit by a combination of Brexit uncertainties, rising global trade tensions and especially weak demand for autos.”

Sterling gave up some gains made earlier in the session following the news, but was still trading nearly 1% higher versus the dollar at 1.28. Against the euro, the pound was up 0.4% to 1.13.

The lacklustre performance is also filtering through to the labour market, with manufacturing employment declining for the first time since July 2016.

Staffing levels rose at SMEs, but fell for the third straight month at large-sized companies, the survey said.

Job losses were directly linked to the decline in new work received, staff reorganisations, redundancies and efforts to control costs.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Alarm bells were ringing in the sector this month as the Index slipped closer to edge of the no-change mark with purchasing falling for the first time in over two years.

“Overall activity was marred by a drop in export orders and continuing weak domestic demand as Brexit took another bite out of client confidence.”

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