UK manufacturing slows as Brexit preparations accelerate

The UK manufacturing PMI fell to a four-month low in February, according to the latest survey by IHS Markit/Chartered Institute of Purchasing and Supply (CIPS) monitored by Kallanish. Stocks of inputs and finished goods rose sharply and the rate of job losses soared to a six-year high as optimism hit a series low, the survey found.

The headline seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell to a four-month low of 52.0 in February, down from a revised reading of 52.6 in January (originally reported as 52.8). The PMI is currently at its second-lowest level since July 2016 – the month following the EU referendum, Markit /CIPS says.

Manufacturers’ optimism regarding future output fell to its lowest level in the series history in February. Positive sentiment was either at, or near to, record lows across the consumer, intermediate and investment goods sectors, the survey results showed.

There is much preparation work being carried out in the sector for the post-Brexit period, Markit/CIPS says. “Preparations to mitigate Brexit uncertainty were most visible in the trend in stocks of purchases. Pre-production inventories rose to the greatest extent in the series history, after also hitting a record high in January. Almost 70% of the companies offering a reason behind the build-up of stocks attributed it to Brexit.”

The UK steel sector meanwhile continues to face headwinds of its own. Estimated crude steel output for January was 520,000 tonnes, down -11.2% from the same month in 2017 and less than half what it was in January 2015 (1.064 million tonnes).

The nation’s steel users’ dependence on steel majorly imported from EU countries, with which there stands to be no free-trade agreement on 30 March, has therefore doubled in just five years. Little wonder therefore that UK manufacturers have loaded up to the metaphorical gunwales with inputs and are battening down the equally-metaphorical hatches in anticipation of a rough voyage to come.