UK PMIs: Manufacturing activity slows in January as export orders shrink
Manufacturing growth slowed its lowest rate in three months in January as Covid-19 and Brexit weighed upon export orders.
The IHS Markit/CIPS Purchasing Managers’ Index fell to 54.1 last month, down from 57.5 in December. Any reading above 50 designates growth.
However, the score was higher than analyst estimates of a score of 52.9.
The fall is especially pronounced because December’s reading marked a three-year high for the measure as manufacturers rushed to stockpile ahead of the UK’s departure from the EU common market.
Rob Dobson, director at IHS Markit, said: “Whereas many countries are seeing manufacturers provide a much-needed support to economic growth
as the service sector is hit by COVID-19, the UK’s manufacturing sector has come close to stalling.
“A mixture of harsher COVID-19 restrictions and Brexit led to near-record supply-chain disruptions, lower exports and increased costs. The impact was felt most at consumer goods producers, who reported steep falls in output and new orders.
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“There were also early signs that smaller companies were being hit harder by the tougher operating environment than medium- and larger-scale producers.
Firms said a third lockdown, client closures and new uncertainty led to the fall in output and new orders among small firms.
By contrast, medium-sized and large firms saw output and orders rise over the month.
Chris Barlow, head of manufacturing at auditor MHA, said that the fall was no surprise.
“UK manufacturing was artificially boosted in December 2020 because companies took measures to avoid the anticipated Brexit chaos at UK ports. Now Brexit trade friction is starting to bite”, he said.
“As Brexit comes on top of Covid-19 and all its attendant problems, manufacturing firms lack confidence. Many are understandably worried about cashflow and for this reason are holding back new investments. It is time for the government to help the sector with a new industrial strategy.”