UK manufacturing remains weak amid election, Brexit delay: IHS Markit

UK manufacturing’s recent downturn continued in November as businesses responded to the delay to Brexit and a fresh injection of uncertainty from the forthcoming general election, IHS Markit said Monday.

Output and new orders fell, while destocking activity resumed as firms depleted buffers built-up in advance of the postponed exit date.

The IHS Purchasing Managers’ Index slipped to 48.9 in November, from 49.6 in October but was above the earlier flash estimate of 48.3. The PMI has been below the 50.0 mark for seven months in a row.

November saw a reduction in manufacturing output, with the rate of decline accelerating slightly over the month.

Companies reported scaling back production in response to lower new order intakes. Efforts to reverse high stock holdings also contributed to the contraction, as did settling backlogs of work directly from inventories.

New orders fell for the seventh month in a row, reflecting tougher conditions in both domestic and overseas markets.

Companies attributed that to destocking at clients following the delay to Brexit and the ongoing uncertainty surrounding the political, economic and global trade situations. The decline in new export orders was among the steepest registered over the past seven years.

November saw manufacturing employment fall for the eighth straight month, with the pace of job losses the steepest since September 2012. Companies linked further cuts to cost reduction efforts, efficiencies, Brexit uncertainty, redundancies, natural wastage and staff restructuring.

Sector data indicated the downturn at investment goods producers remained severe, with production, new orders, new export business and employment all contracting at steeper rates than the other sub-industries. Output, new business and staffing levels at intermediate goods producers also fell.

There were brighter signs from the consumer goods sector, which saw growth of both output and new orders.

Last week, the Society of Motor Manufacturers and Traders said UK car manufacturing output fell 4.0% year on year in October, with 134,752 units produced. UK car production has now fallen in 16 of the past 17 months, SMMT said.

On average, 900 kg of steel is used per vehicle, according to worldsteel. The UK steel industry produces 8 million mt of steel per year, around 80% of domestic demand.