UK manufacturing output declines amid Brexit fears and trade tensions

The British manufacturing industry slowed in October, leading to job losses as businesses look to cut costs amid Brexit uncertainty and rising trade tensions.

British flag in a warehouse
Source: Bloomberg

UK manufacturing slowed in October, as output declined to its lowest level in over two years, prompting companies to cut jobs in response to Brexit uncertainty and growing trade tensions, according to the Purchasing Managers Index (PMI) report by IHS Markit/CIPS.

According to the survey, seasonally adjusted PMI fell to a 27-month low of 51.1, down from September’s revised reading of 53.6.

‘October saw a worrying turnaround in the performance of the UK manufacturing sector,’ Director at HIS Markit Rob Dobson said. ‘At current levels, the survey indicates that factory output could contract in the fourth quarter, dropping by 0.2%.’

‘New orders and employment both fell for the first time since the Brexit vote as domestic and overseas demand were hit by a combination of Brexit uncertainties, rising global trade tensions and especially weak demand for autos,’ he added.

UK manufacturers become ‘defensive’

Manufacturers in the UK have not only stopped hiring, but have also grown ‘increasingly defensive’, with companies looking to protect cash flow and implement wider cost-cutting measures, including a decrease in purchasing activity and lowing inventories, Dobson said.

The manufacturing industry linked the decline the sector has seen to lower new order inflows from overseas and a softening of growth in domestic demand.

The new orders balance slid to 49.7 in October, down from 52.8 in September – the first reading below 50 since the Brexit vote on 23 June 2016.

‘Overall activity was marred by a drop in export orders and continuing weak domestic demand as Brexit took another bite out of client confidence,’ Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said.

‘To see inflows of new orders first decline since the middle of 2016 following the referendum, will send shivers down the spine of business.’

'Any hope that the current situation would not continue to impact has surely now evaporated,' he added.

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