Tuesday 1 September 2020 10:11 am

UK factories grow at fastest pace in six years but continue to slash jobs

The UK manufacturing sector’s output grew at the fastest pace in more than six years in August as factories continued to recover from the coronavirus lockdown, a survey has shown.

However, the sector was far from its pre-coronavirus size and firms laid off workers at a rapid rate as they adapted to the new economic situation.

Read more: UK economy unlikely to recover until 2023, KPMG says

The IHS Markit/Cips purchasing managers’ index rose to 55.2 in August. That was slightly below a preliminary reading of 55.3 but considerably higher than July’s 53.3 figure. A score above 50 indicates expansion.

Output rose at the quickest pace since May 2014, the survey showed. IHS Markit, which compiles the survey, said this reflected solid growth in the consumer, intermediate and investment goods sub-sectors.

The improvement in the UK manufacturing sector was “led by an upturn in domestic demand and signs of recovering exports,” said Rob Dobson, director at data firm IHS Markit.

New orders rose at the fastest rate since 2017, helping “business optimism [remain] encouragingly robust and close to July’s recent peak,” Dobson said.

UK manufacturing recovery could slow

Yet Dobson suggested the recovery may slow down in the autumn. “The current bounce is mainly driven by the restarting of manufacturers’ operations and reopening of clients as Covid-19 restrictions continue to be relaxed,” he said.

Worryingly for the sector, backlogs of work fell in August at an increased rate, suggesting there is spare capacity. 

The manufacturing jobs market continued to suffer, with firms laying off workers for the seventh month in a row.

Read more: UK ready to walk away from Brexit trade talks over state aid demands

Duncan Brock, group director at Cips, the Chartered Institute of Procurement & Supply, said that despite the fast growth, “the elephant in the room remains the poor employment figures”.

“The drop in job numbers in August makes this feel more of a rebalancing strategy than real recovery.”