Britain's manufacturing sector had its best month in over a year in March, fuelled by a record pace of Brexit stockpiling, although experts warned that no-deal preparations obscured the true picture.
The UK manufacturing purchasing managers index (PMI) hit 55.1 last month as trends in output and employment strengthened, according to eagerly-watched data from IHS Markit released today. A score of over 50 means growth.
The UK fared far better than its European neighbours in March with manufacturing PMI in Germany, France, and Italy all shrinking, driving a contraction in the Eurozone as a whole, IHS Markit revealed earlier today.
Britain’s PMI figure, which gives a comprehensive overview of the strength of the industry, increased from its February score of 52.1. The PMI has now remained above the 50 benchmark for 32 months in a row.
The key factor in the index’s growth was efforts to build stocks to prepare for the disruption to business of a no-deal Brexit, IHS Markit said. The rate of increase in stocks of purchases hit a survey record high for the third month running in March.
Many businesses said they hired more staff to help deal with higher demand, providing a boost for the labour market. Jobs growth was recorded in March following back-to-back reductions in January and February.
However, companies warned that future output growth may be constrained due to ongoing political uncertainty and as the current strong pace of inventory building unwinds over the rest of the year.
Brexit concerns continued to weigh on business sentiment in March. While optimism among businesses rose slightly, it was subdued compared to the longer-term average, IHS Markit said.
Head of manufacturing at Barclays, Helena Sans, said: “Encouraging as today’s figures may appear, the true picture of UK manufacturing continues to be obscured by stockpiling, driven by the ongoing Brexit uncertainty.”
“This pattern looks unlikely to change until manufacturers see some whiff of white smoke above Westminster,” she said.
Director at IHS Markit, Rob Dobson, said: “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.”
“The survey is also picking up signs that EU companies are switching away from sourcing inputs from UK firms as Brexit approaches,” he said.
Dave Atkinson, UK head of manufacturing, SME and mid-corporate at Lloyds Bank Commercial Banking, said: “The uptick in the PMI reading is encouraging. That said, it’s still difficult to say whether this is indicative of real growth, or whether demand is being temporarily boosted by businesses continuing to stockpile goods.”
He added: “Manufacturers will hope that in the coming months we’ll see a stronger outlook globally or greater certainty at home, which will hopefully prompt increased business investment across the sector.”