World Economy

UK Manufactures Struggle as Exports Fall

The manufacturing sector moved closer to stagnation last month.The manufacturing sector moved closer to stagnation last month.

Activity among British manufacturers has slowed to its weakest level since the Brexit vote while exports have recorded the sharpest fall in four years and hiring in the sector has stagnated, a survey suggests.

The purchasing managers’ index for manufacturing, considered one of the most reliable surveys on the sector, showed a balance of 52.8 in August. Economists had expected the balance to remain at the 53.8 recorded in July, news outlets reported.

This was above the 50 mark that separates expansion from contraction but it is still the slowest growth since July 2016.

That’s the weakest reading in 25 months, and shows the sector moved closer to stagnation last month.

Markit, which compiles the survey, says that new export orders fell last month for the first time in over two years. This dragged job creation down to near-stagnation, while business optimism hit a 22-month low.

The drop came as the pound fell by 0.73% against the dollar at 1.286, having already been on the back foot over negative Brexit headlines.

Stephen Cooper, UK head of industrial manufacturing at KPMG, says the PMI report has “a bit of back to school dread” about it, The Guardian reported.

Optimism has fallen whilst job creation is virtually at a standstill, with cuts by larger businesses neutralized by job growth in SMEs.

“Together with export orders–also at a 25 month low despite continued sterling weakness–these figures are particularly concerning against the backdrop of global trade wars and increasing uncertainty around Brexit–both of which will be weighing on businesses,” he said.

UK factories are grappling with “suppressed domestic demand and a slowdown in output”, explains Dave Atkinson, UK head of manufacturing at Lloyds Bank Commercial Banking.

He adds: “As we approach the final months of negotiations on Britain’s exit from the EU, firms are continuing to plan for all outcomes. Investment in automation and robotics are key for many who are looking to tackle productivity and mitigate labor shortages.

“However, there remains some anxiety among manufacturers with exposure to consumer markets. Sluggish wage growth has blunted spending power and the current woe in the retail sector is weakening demand for new stock.”

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