UK manufacturing orders fall for first time since aftermath of Brexit referendum and growth slows
New orders and employment in the UK manufacturing sector have dropped for the first time since July 2016 in a “worrying turnaround” in October.
Conditions in the sector “slowed sharply” as output growth weakened and new order inflows and employment declined for the first time since the aftermath of the EU referendum, according to the closely-followed IHS Markit/CIPS Purchasing Managers’ Index (PMI) figures.
PMI fell to a 27-month low of 51.1 down from September's reading of 53.6, with companies blaming lower inflows of new work from overseas, particularly from within the EU due to Brexit uncertainty but also global trade tensions.
The IHS Markit and CIPS report said the drop in new orders led to a “sharp slowdown” in production growth, with output growth the weakest since August 2016.
“October saw a worrying turnaround in the performance of the UK manufacturing sector,” IHS Markit director Rob Dobson said.
“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.
Employment fell for the first time in 27 months as a result of the poor performance of the sector.
The survey found staffing levels rose at SMEs but fell for a third straight month at large companies, with job losses being linked to the decline in new work, staff reorganisations, redundancies and efforts to controls costs.
UK manufacturers remained positive, the survey revealed, with more than 48 per cent expecting output to be higher one year from now.
But Duncan Brock, director at the Chartered Institute of Procurement and Supply (CIPS), said “alarm bells were ringing” in the sector and Brexit had taken another bite out of client confidence.
Shannon Murphy, manufacturing expert at trade credit insurer Euler Hermes, said her clients were reporting customers cutting new orders contracts from six months to three.
“The focus is narrowing from long-term plans as businesses try to manage uncertainty. Until firms have more clarity about what a future relationship with the EU looks like, investment levels are likely to continue to flatline and confidence will remain low,” she said.