UK manufacturing PMI remains stuck at six-and-a-half year low in July

The downturn in the UK manufacturing sector continued at the start of the third quarter, with production and new orders shrinking as manufacturers faced the ongoing headwinds of political uncertainty, a global economic slowdown, and the unwinding of stocks built prior to the original Brexit date.

At 48.0 in July, unchanged from June, the IHS Markit/ CIPS PMI stayed below the neutral 50.0 mark for the third straight month.

The last time the PMI was below its current level was in February 2013.

The downturn in the sector negatively impacted the trend in staff hirings during July.

Employment decreased for the fourth moth in a row, with the pace of decline accelerating to one of the highest over the past six-and-a-half years.

There were also reports of natural wastage, recruitment freezes, and cost-control initiatives contributing to job cuts.

Rob Dobson, Director at IHS Markit, said: “July saw the UK manufacturing sector suffocating under the choke-hold of slower economy growth, political uncertainty and the unwinding of earlier Brexit stockpiling activity.”

“Production volumes fell at the fastest pace in seven years as clients delayed, cancelled, or re-routed orders away from the UK, leading to a further decline in new work intakes from both domestic and overseas markets.”

“The weak, highly competitive environment makes a sustained revival highly unlikely in the coming months. However, a short-lived bounce leading up to October should not be ruled out, as some manufacturers are already gearing up to re-start Brexit preparations.”

“If so, expect a déjà-vu during quarter four, as another correction in inventory holdings hits growth in the lead-up to year-end.”

“On a more positive note, there may still be brighter times over the horizon. Over two-fifths of companies expect to see higher output a year from now, assuming political uncertainties and global trade tensions ease as expected.”

Stephen Cooper, Head of Industrial Manufacturing at KPMG UK, said: “As the UK recovers from the record-breaking heatwave last week, manufacturers won’t be sharing the same sunny disposition with the latest PMI results.”

“The data does not provide good holiday reading, with a continued negative view for manufacturing and it’s not just restricted to the UK.”

“Through the UK manufacturing PMI figure for July remains flat at 48.0, Europe’s manufacturing data came in at a six-month low at 46.5, whilst Germany recorded its sharpest deterioration in seven years, at 43.2.”

“This reflects ongoing challenges presented by geopolitical events, Brexit, and trade wars which have hampered the sector’s growth.”

“As the October deadline for Brexit approaches, stockpiling is back on the cards once again, and UK manufacturers will be seeking to manage their operations ever more carefully over the next few months. This means thinking about the basics with clear plans, and as we have said previously, managing working capital staffing levels, supply chains, and inventory.”

“However, it’s not all doom and gloom, as over 40 per cent of Britain’s manufacturers are optimistic about the future, and history has shown that the industry is resilient and gets on with business, despite though times.”