Tuesday, June 2, 2020

UK cautious as manufacturing sentiment declines

The IHS Markit/CIPS UK Manufacturing PMI, slumped from 53.6 in September to 51.1 in October, its lowest since July 2016.

New orders and employment were found to decline for first time in 27 months. The decline in orders were attributed to lower inflows of new work from overseas and softer growth of domestic demand. Some companies noted that Brexit uncertainties negatively impacted new work from within the EU, while others pointed to rising global trade tensions and weaker demand from the world autos sector.

Duncan Johnston, UK manufacturing industry leader at Deloitte, said: “The decline in the October PMI data reflects manufacturers’ concerns about global trade tensions and the impact of Brexit on the sector. In line with the results of the latest CBI Industrial Trends survey, both new domestic and export orders are declining.

“For the first time in more than two years, employment in the sector also fell, with the reduction mostly seen in larger businesses. Manufacturers are becoming noticeably more cautious about the prospects for the sector, resulting in an impact on hiring and investment decisions.

“The survey responses were gathered before this week’s budget, which provided a welcome boost for manufacturers. An announcement that has received little attention, was the £121m of additional funding for the Made Smarter campaign.

“This will see the government continue to invest in technological innovation and the transformation of the UK manufacturing industry, which is central to its long term future. It is encouraging to see the government allocating resourcing to new technologies such as the Internet of Things.”

Justin Benson, Head of Automotive at KPMG UK, said: “With the UK manufacturing PMI for October dropping by 2.5 points, it suggests that business confidence is on a downward trend. Combine that with Brexit, trade negotiations between the US and China, German elections and Italian debt, the picture it paints is one of increased geopolitical uncertainty.

“With this PMI downturn and the last two quarters of negative investment growth, the industry needs to get investing again. The UK is still a great place to make high quality products cost effectively, but in order to remain competitive, UK businesses must look to extend exports in new markets, or start exporting, if they aren’t already.”

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