UK manufacturing remains 'lacklustre' as Brexit uncertainty weighs on activity

Rob Dobson of IHS Markit, which compiles the PMI survey, said that manufacturing was growing at only a moderate pace

Many manufacturers said the backdrop of Brexit and a volatile exchange rate were 'making any forecasting activity increasingly difficult' (AFP/Getty)

UK manufacturing remained “lacklustre” in September as Brexit-related uncertainty continued to weigh, according to the latest survey snapshot of the sector.

The Purchasing Managers’ Index for the month showed a mild improvement, rising from 53 to 53.8, with any figure above 50 signalling growth.

But Rob Dobson of IHS Markit, which compiles the survey, said that this suggested manufacturing was growing at only a moderate pace.

“Despite these causes for short-term optimism, conditions in manufacturing are still relatively lacklustre overall,” he said.

“Many UK manufacturers also noted that the backdrop of Brexit and a volatile exchange rate were making any forecasting activity increasingly difficult, with uncertainty adding to reluctance to hire.”

Samuel Tombs of Pantheon agreed: “Uncertainty about the UK’s future relationship with the EU likely has contributed to a slowdown in demand.

“French manufacturers, for instance, are more likely to switch to sourcing components from other EU countries, given the risk that supply chains across the Channel could break down after Brexit. It’s hard to see growth in manufacturing output recovering until the risk of a no-deal Brexit has been extinguished.”

Hit by Brexit uncertainty

The Office for National Statistics estimated last week that manufacturing, which accounts for around 10 per cent of the UK economy, contracted by 0.7 per cent in the second quarter, following a 0.1 per cent shrinkage in the first three months of the year.

This followed a strong performance in 2017, when it is estimated to have grown by 2.6 per cent.

A survey of 1,000 export manufacturing firms by the UK Trade Policy Observatory last month found that Brexit had already hit them hard.

Almost 30 per cent of those who were able to provide data have already lost business directly as a consequence of the vote to leave the EU and a third have already experienced a Brexit-driven fall in investment.

-0.7%

Decline in manufacturing output in second quarter of 2018

Separately, the Bank of England reported on Monday that consumer credit growth slowed to a three-year low in August.

Borrowing was up 8.1 per cent year on year, the slowest rate since September 2015.

However, mortgage approvals picked up to 66,440, slightly ahead of analysts’ expectations and above the previous six month average of 64,310.