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The UK manufacturing sector has fought its way through the latest lockdown which began in February and climbed back to its highest levels, new figures have shown. The IHS Markit/CIPS Purchasing Managers’ Index rose to 55.1 last month, up from 54.1 in January. Any reading above 50 shows growth.
Looking back for a comparison, the manufacturing PMI rose to its highest level in over three years in December, mainly reflecting a boost from last-minute preparations before the end of the Brexit transition period.
The figure, a 37-month high, beat economists’ forecasts with a reading of 57.3 for the final month of 2020. It marked a considerable improvement from the previous month, when the index stood at 55.6. It was an increase for the seventh straight month as factories recovered from the impact of the second national lockdown.
However, a combination of supply chain disruption as a result of the UK’s departure from the EU and cost pressure due to material shortage kept a lid on output growth. New orders expanded following a slight decrease in January, as domestic demand improved and new export business inched higher.
Rob Dobson, director at IHS Markit, warned that manufacturing constraints look set to remain for the months to come. “The UK manufacturing sector was again hit by supply chain issues, Covid-19 restrictions, stalling exports, input shortages and rising cost pressures in February.
“Look past the headline PMI and the survey reveals near stagnant production, widespread shipping and port delays and confusion following the end of the Brexit transition period’’, he said. Adding: “With current constraints likely to continue for the foreseeable future, pressure on prices and output volumes may remain a feature during the coming months”.
In the Eurozone, manufacturing growth jumped to a three-year high of 57.9, up from 54.1 in January.
A surge in demand helped the measure to one of the highest levels in its history, though also resulted in a shortage of raw materials and a spike in input costs.
Head of manufacturing at accountants BDO, Richard Austin, said that the contrast between the UK and EU’s performance was illustrative of the problems Brexit has caused for supply chains.
“While the rise in the UK’s manufacturing PMI is encouraging, sentiment is notably lower than in major Eurozone economies which have reported the fastest growth in manufacturing for three years”, he said.
“While the vaccine roll-out is faster in the UK than in mainland Europe, this would suggest that Brexit frictions are proving challenging.”
Austin added: “What manufacturers needed was a targeted tax policy which supports a green economic recovery through the adoption of new technology and digital transformation. Without the right investment conditions, the UK manufacturing sector risks falling behind international competitors.”
The export of British goods to the EU fell by more than two-fifths in January, prompting questions of Brexit plans.
Latest figures from the Office for National Statistics (ONS) show that the overall export of goods from the UK to the European Union plummeted by more than 40 per cent, or £5.6 bn. Imports from the EU also slumped by £6.6 bn.
The falls in imports and exports are the largest since records began in 1997, the ONS said, with the export of food and live animals to the EU hit particularly hard.
The export of livestock dropped 64 per cent in January alone.
Shadow minister for the Cabinet Office, Rachel Reeves, said: “Businesses have been appealing to the Government to start listening to the problems they’ve been facing, but they’ve been left out in the cold.”
(The writer is our foreign correspondent based in the UK)
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