Brexit: Manufacturers stepped up stockpiling in December, survey reveals

Analysts said the positive impact on the headline activity index would likely be temporary

Ben Chu
Economics Editor
Wednesday 02 January 2019 10:53 GMT
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Brexit: What will happen in 2019?

Nervous UK manufacturers stockpiled goods and material in December ahead of Brexit, the latest survey of the sector showed.

Input inventories subsequently rose at the fourth-fastest rate in the 27-year history of the Purchasing Managers’ Index (PMI).

“Stocks of purchases and finished goods both rose at near survey-record rates, while stockpiling by customers at home and abroad took new orders growth to a 10-month high,” said Rob Dobson of IHS Markit, which compiles the PMI.

The inventory buildup helped boost the headline activity index to a six-month high of 54.2, up from 53.6 in November. A figure above 50 represents growth from the previous month.

But analysts warned the positive impact would probably be temporary.

“Though the overall index figure was higher than last month, this should be viewed with some scepticism,” said Duncan Brock of the Chartered Institute of Procurement & Supply, which sponsors the PMI survey.

“Whilst the road to Brexit remains mired in the mud of indecision and disagreement, there is likely to be some correction in the sector this year as Brexit buffer stocks are depleted and overall output could fall.”

Confidence among manufacturers remained close to a 27-month low in the month, with many firms citing Brexit and the exchange rate as a concern over the next 12 months.

Last year the Centre for Economics and Business Research said that rapid stockpiling by firms ahead of a possible no-deal Brexit – followed by a drop in buying – could result in a “mini recession” for the UK this year.

“Any revival in manufacturing output in [the second quarter], shortly after a no-deal Brexit likely will have been averted, will be sluggish, because producers simply will run down stocks,” said Samuel Tombs of Pantheon.

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