UK manufacturing industry continues its recovery in November

Dec 02, 2020

The upturn in the UK manufacturing sector strengthened in November, including growth in output and new business.

The upcoming end to the Brexit transition period meanwhile led to rising levels of input purchasing, stockpiling of raw materials and stronger gains in new export business as EU-based clients brought forward orders

This is according to survey data collected from 12-25 November for the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI).

The index rose to a 35-month high of 55.6 in November, up from 53.7 in October. The PMI has now signalled expansion for six successive months.

Manufacturing production increased again in November. Although the rate of expansion was both solid and above that registered in the prior survey month, it was also weaker than those seen through the third quarter of the year. The upturn in production volumes was linked to companies reopening following COVID-19 closures earlier in the year and improving demand.

November saw a marked divergence between different sectors within manufacturing. The intermediate and investment goods industries both registered robust and accelerated growth of output. In contrast, the downturn in the consumer goods sector continued, with back-to-back decreases in both production and new business.

The overall volume of incoming new business rose during November, albeit to a slightly lesser extent than the prior survey month. Manufacturers saw higher inflows of new work from overseas, in part boosted by EU clients bringing forward purchases before the Brexit transition period ends. There were also reports of higher intakes from Asia and the US.

The upcoming end to the Brexit transition period also affected the trends in purchasing, stocks and supplier lead times. Input buying volumes increased to the greatest extent since March 2019, mainly to achieve the steepest growth in stocks of purchases for over a year.

Fhaheen Khan, senior economist at Make UK, commented on the figures: “This points to a continued, yet subdued, expansion of the manufacturing sector as orders slowly return following the easing of restrictions. It also appears the alarm bells that took hold of manufacturers just before the first EU-exit deadline have returned in some capacity as businesses sought to stockpile. While it may be rational in today’s uncertain environment,  it is creating the impression that manufacturing is performing well just before the transition period ends.

“It is clear the uncertainty is felt by both sides as EU manufacturers are also stockpiling to some degree resulting in a short-term boost to business for UK manufacturers too. However, such actions are generally followed by a period of depressed activity as manufacturers begin to service future orders using these very stockpiles.”

Source: Production Engineering Solutions