Growth in the UK’s manufacturing sector has plunged to its lowest levels in more than a year, due to the impacts of soaring inflation, supply shortages, and the war in Ukraine.
The rate of expansion in the UK’s manufacturing sector has dropped to its lowest levels in 13 months, according to S&P Global’s Purchasing Managers Index (PMI), which said growth slipped to lows of 55.2 in March from highs of 58.0 in February.
Manufacturers said ongoing supply shortages, caution among clients, soaring inflation, and geopolitical tensions had all hindered growth.
Rob Dobson, director at S&P Global, said: “Manufacturers are being hit by several headwinds simultaneously, as supply shortages, greater caution among clients, escalating inflationary pressures, ongoing Brexit factors and rising geopolitical tensions all hamper the upturn.”
Companies reported they were being charged higher prices for a wide-range of goods, as the combination of supply shortages, supply chain disruption, material shortages, and higher energy costs caused prices to rise.
Manufacturers said they had passed on higher costs to customers, as average selling prices rose at their fastest rates in three months.
Meanwhile, new orders sank to their lowest levels since January 2021, as UK exports dropped for the sixth time over the past seven months.
The lower number of exports is the result of mounting geopolitical tensions and the ongoing impacts of Brexit, S&P said.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said: “Pipelines of work from overseas also took a hit and fell for the sixth time in just over half a year as Brexit customs added to the impacts on UK supply chains.”
Nonetheless, the number of job vacancies increased for the fifteenth month in a row, as employers sought to restaff their businesses on the back of increased output and higher demand.
“Job creation is holding up better though, with a further solid increase seen in March, as companies continue to respond to continued growth and address ongoing labour shortages. However, such strong hiring looks unsustainable in the face of the mounting headwinds,” Dobson said.
Deloitte’s UK manufacturing leader James Williams said: “There is some positivity hidden in the negative headlines, in terms of the UK’s manufacturing sector. Production is still expanding, employment is up and new orders are increasing albeit at a slower rate.”
Jonathan Andrew, CEO of Bibby Financial Services said: “Many small to medium sized businesses in the manufacturing industry are struggling to keep their heads above water as the costs of energy, raw materials and transport reach record highs.”
“Two years on from the pandemic, these businesses had hoped to be on the road to recovery, but the situation is so volatile that many of these SMEs can only aspire to break even, rather than invest in and grow their businesses.”