Monday 3 August 2020 9:48 am

UK manufacturing output grows at quickest pace since 2017

UK manufacturing output grew at its fastest rate in almost three years in July as the sector continued to grow after it was all but shut down due to coronavirus in April, according to survey data.

The IHS Markit/Cips UK manufacturing purchasing managers’ index (PMI) – a gauge of the health of the sector – rose to a 16-month high of 53.3 in July from 50.1 in June.

Read more: Eurozone manufacturing sector returns to growth but worries remain

It was slightly below an initial estimate of 53.6 but was well above the 50 mark which indicates expansion. The growth came as the government continued to lift coronavirus restrictions on the UK economy, leading to a rebound in demand.

Driving the recovery was a jump in output. It expanded at the quickest pace since November 2017, marking the second straight month of growth.

Data firm IHS Markit said it was “a positive start to the recovery”. But it cautioned that “it will take several months of growth to fully recoup the output lost since the start of the pandemic”.

New orders grew for the first time since February as domestic demand grew. Confidence levels rose to their highest since March 2018.

Job cuts and weak exports weigh on UK manufacturing

But new export business dropped for the ninth month in a row, the data suggested. This reflected weak global demand as coronavirus continues to spread around the world.

Worryingly for the British economy, UK manufacturing employment fell for the sixth month in a row. Survey respondents reported they were “aligning capacity with current output needs”.

IHS Markit director Rob Dobson said: “The UK manufacturing sector started the third quarter on a much firmer footing.”

“The recovery strengthened as a loosening of lockdown restrictions allowed manufacturers to restart or raise production.”

Yet Dobson said that “the road left to travel remains long and precarious”. He added: “An extended period of growth is still needed to fully recoup the ground lost in recent months.”

Read more: UK economy could take four years to recover, says EY

Duncan Brock, group director at Cips, the Chartered Institute of Procurement & Supply, said the employment situation was “bleak”.

“With a ravaged economic landscape it will be a slow train to recovery, managing the ebbs of flow of potential disruptions to come.”