Fears of UK manufacturing 'stagnation' as foreign demand falls

One of the main measures of the performance of manufacturing industry fell to its lowest level for more than two years in August, increasing concerns of sector “stagnation”.

The Purchasing Managers' Index (PMI) for UK manufacturing, based on factors including production levels, employment and new orders, fell to the 25-month low of 52.8 in August. Any reading below 50 would represent contraction.

“The performance of the UK manufacturing sector looked increasingly lacklustre in August,” said Rob Dobson, director at analysts HIS Markit. “The headline PMI fell to its lowest level for over two years, as growth of output and new orders slowed and the pace of job creation slumped to near stagnation.”

He added: “The latest PMI report is broadly consistent with zero growth in manufacturing production, meaning the sector will likely fail to provide any support to the wider UK economy in the third quarter.”

The main constraint was the first decline in foreign demand since April 2016, he said. The trend came amid reports of slower global economic growth and increasingly uncertain international trade. Greater “inflow” of new workers from the UK and international sources is needed to boost the sector, he said.  

“Fears for a stalling manufacturing sector took a step closer to becoming a reality this month with the most disappointing performance for two years,” said Duncan Brock, group director at the Chartered Institute of Procurement & Supply. “With a subdued global economy threatened by escalating trade wars and Brexit uncertainty making its mark, it’s unclear where future opportunities to sustain the health of the sector will come from.”

Higher costs for metals, electronic components, energy and other outgoings also resulted in increased selling prices from manufacturers.

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