The early days of recession in the UK are beginning to affect several sectors. Manufacturing production and new orders slumped in August, sinking at the fastest rate since the early months of the Covid-19 lockdown two years ago. Firms are experiencing a downturn in the sector, as manufacturers are facing a reversal in new orders from domestic and overseas customers.
Customer demand has fallen causing business confidence to plummet. August marked the largest contraction since May 2020, the latest S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) data showed. The index fell to 47.3 from 52.1 in July, with numbers below 50 are considered a contraction. Analysts said that the data indicated signs of an emerging recession in the manufacturing sector.
UK Head of Manufacturing at KPMG, Rebecca Shalom, said: “Faced with a multitude of costs pressures alongside rising inflation, manufacturers are increasingly searching for efficiencies or delaying investments.” Energy-intensive firms in particular are set to be increasingly concerned about how much longer they can survive such heightened pressures, Shalom added. There was weaker demand from key markets in August, with key markets including China, the UK and the US all subdued.
Dampening demand in these markets has intensified supply chain issues that arose after the Covid lockdowns and Brexit, according to the PMI report. Backlogs of orders also eased up in August, after sustaining firms for a while.
Activity in the construction sector has shrunk for the second consecutive month in a sign of the UK economy’s malaise spreading across sectors, a survey showed. S&P Global and the Chartered Institute of Procurement and Supply’s (CIPS) PMI moved higher to 49.2 in August, up from 48.9 in July.
In spite of rising, the PMI remained below the 50-point threshold that separates growth and contraction. The reading topped City investors’ expectations. Stagnating demand driven by concern about the state of the UK economy weighed on the country’s construction sector.
Economics director at S&P Global Market Intelligence, Andrew Harker, said: “The UK construction sector looks set to be in for a challenging period”. The survey matches with a separate PMI published last week that showed Britain is hovering on the edge of a recession. The country’s combined services and manufacturing PMI was revised down to below 50-point mark.
Surging inflation fuelled by high energy prices is putting households and businesses under intense strain, prompting experts to predict the UK is headed for a long recession. New prime minister, Liz Truss has signed off further measures to support the economy through the inflation spike. Rising costs are squeezing businesses’ margins, prompting them to shelve construction projects. New order growth slumped to its weakest level since June 2020, according to S&P Global and CIPS.
In the retail sector, the recovery of footfall slowed in August as the cost-of-living crisis caused shoppers to steer clear of spending splurges. Although footfall at retail destinations in the UK continued to slowly climb back towards pre-Covid levels, the pace of improvement slowed according to the latest data from the British Retail Consortium (BRC).
Overall footfall for retail outlets was down 12.4 per cent compared to pre-Covid levels, an improvement of just 1.8 percentage points from July. This was worse than the three-month average decline of 12.3 per cent. People in the UK are facing huge increases to energy bills as other household costs, including groceries and fuel, also shoot up.
BRC boss, Helen Dickenson said: “Many people remain concerned about the rising cost-of-living and the price of their energy bills, which has kept them away from visiting high streets and town centres.” Compared to 2019, High Street footfall was down 13.6 per cent in August. (The writer is our foreign correspondent based in the UK)
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