UK manufacturing upturn slows as new export business falls and pace of stockpiling eases

April saw the recent growth trend at UK manufacturers show signs of petering out, as rates of expansion in output and new orders slowed and new export business decreased at the second-fastest pace in four-and-a-half years, according to the IHS Markit CIPS UK Manufacturing PMI.

The main theme in UK manufacturing in recent months has been accelerated stockpiling in preparation for Brexit, culminating with the survey-record increases in both inventories of inputs and finished products in March, a process which largely continued into April, with further substantial expansions to holdings signalled.

However, the delay to the UK’s departure date meant that rates of increase in both stock measures eased.

April saw overseas demand decrease at the second-fastest pace in the past four-and-a-half years, with Brexit uncertainty being the main factor underlying the decrease according to companies.

Rob Dobson, Director at HIS Markit, said: “The upturn in the UK manufacturing sector eased at the start of the second quarter. Growth of output and new orders slowed, leading to job cuts for the third time in the past four months.”

“The trend in new export business was especially weak, as high stock holdings at clients and slower economic growth led to reduced demand from key markets such as the European Union, the USA and China.”

“There were also reports of overseas clients acting now to re-route their supply chain away from the UK in advance of Brexit.”

“Manufacturers’ outlook remained relatively upbeat, with over 50 per cent forecasting their output will be higher in 12 months’ time. Companies plan to use new product launches, new technologies and improved marketing strategies to drive growth forward in the coming months.”

“However, Brexit uncertainty continues to weigh on plans, as some firms remain concerned about future growth prospects and the likely impact on output and demands from the unwinding of inventory positions later in the year.”

Duncan Brock, Group Director of the Chartered Institute of Procurement and Supply, said: “Some small respite this month came in the form of a marginal ease in input price inflation but the ruthless realities of a weak global economy and the dragging effects of political indecision has the sector merely surviving from one month to the next in the hope of something better soon.”

Stephen Cooper, Head of Industrial Manufacturing at KPMG, said: “After a bumper month of manufacturing activity in March, mainly due to stockpiling, the inventory and working capital build up we saw in response to Brexit slowed in April.”

“However, no one is fool enough to think Brexit has gone away and the unwind, when and if it comes, is cause for some concern.”

“As a result, some overseas customers have been changing their supply chains and UK manufacturers are feeling the pinch as export orders are affected. However, despite this and continued global pressures, manufacturers are not resting on their laurels as more than 50 per cent are optimistic that their output will increase over the next 12 months.”

“Many are focusing their attentions on strategies for growth with expansion plans, new products and technologies, which is to be welcomed as the country’s makers strive to remain competitive in an increasingly challenging environment.”