UK manufacturing PMI at 13-month high as pace of Brexit stockpiling hits fresh survey-record

The impact of Brexit preparations remained a prominent feature at manufacturers in March, as efforts to build safety stocks led to survey-record increases in inventories of both purchases and finished products.

Trends in output and employment also strengthened as stockpiling operations at clients led to improved inflows of new work.

The headline seasonally adjusted HIS Markit/CIPS PMI rose to a 13-month high of 55.1 in March, up from a revised reading of 52.1 in February.

The PMI has remained above the 50.0 benchmark for 32 months in a row.

The trend in manufacturing output improved in March, as companies stepped up production to build-up inventories in advance of Brexit and also meet rising inflows of new work.

New business improved from both domestic and export market, which had a positive impact on staff hiring, with job growth recorded following back-to-back reductions at the start of the year.

Brexit concerns also continued to weigh on business sentiment during March.

Although the overall degree of optimism moved slightly higher, it remained subdued compared to that generally seen earlier in the series history.

Apart from ongoing uncertainty, companies indicated that future output growth may be constrained as the current strong pace of inventory building at both manufacturers and their clients is unwound over the coming year.

On the plus side, 46 per cent of survey respondents forecast output to be higher one year from now.

Optimism was linked to improved demand, new product launches, entering new markets, and reduced Brexit uncertainty in the future.

Rob Dobson, Director at IHS Markit, said: “Manufacturers reported a surge of business activity in March as companies stepped-up their preparations for potential Brexit-related disruptions.”

“Output, employment and new orders all rose at increased rates at manufacturers and their clients raced to build safety stocks. Stocking of finished goods and input inventories surged to new survey-record highs.”

“The stock building boost introduces a major headwind for demand, output and jobs growth moving forward. Manufacturers are already reporting concerns that future trends could be constrained as inventory positions across the economy are unwound.”

“It looks as if the impact of Brexit preparations, and any missed opportunities and investments during this sustained period of uncertainty, will reverberate through the manufacturing sector for some time to come.”

Duncan Brock, Group Director at CIPS, said: “Businesses on both side of the channel intensified their efforts this month to accumulate materials with the fastest increase in the stock building of finished goods since 1992, as the UK hurtled towards the Brexit deadline.”

“The big worry is the threat of uncertainty recedes, businesses will have to resort to heavy discounting on these stocks to free-up valuable operating expenses if normal order levels are not restored in the coming months.”

“With higher price inflation continuing to gnaw away at margins and businesses paying more for energy and raw materials, the economic burdens could deepen and job hiring strategies re-examined.”

Justin Benson, Head of automotive at KPMG, said: “The latest UK manufacturing PMI results come as a bit of a spring surprise with an uptick in activity, as the UK’s manufacturers continue preparing for Brexit by stockpiling.”

“Britain’s manufacturers are resilient and they’re getting on with business, despite the tumultuous geopolitical environment. However, KPMG’s recent manufacturing report findings suggest that whilst many of Britain’s makers are prepared or preparing for Brexit, the uncertainty is preventing longer term investment decisions and this puts a question mark over whether this PMI increase is sustainable.”

“Long term investment is crucial, and will be even more so once Britain leaves the EU as future investment in UK manufacturing is the key to sustaining profitable growth.”