UK manufacturing remains steady but warning signs remain

The sector grew in April but company bosses warned that inflation, the war in Ukraine, Brexit and Covid are all causing concern.

03 May 2022

The UK manufacturing sector improved slightly last month compared with a five-month low recorded in March, according to new figures.

But bosses warned that the ongoing war in Ukraine, Covid lockdowns in China, and poor exports to EU customers struggling with post-Brexit paperwork are all taking their toll.

The closely-followed S&P Global/CIPS Purchasing Managers’ Index (PMI) recorded a score of 55.8 for April, up from 55.3 in March.

Anything above 50 is seen as a sector in growth.

Bosses reported increases in production across all sub-sectors of the industry, although growth in consumer manufacturing was lower than other areas.

Companies said the outlook remains positive, although the overall degree of confidence slumped to a 16-month low, with inflation pressures causing concern.

Last month manufacturers said there was an increase in new business as companies tried to clear backlogs in work.

However, this was only small, and saw several factors holding back greater levels of growth, the survey found.

New order growth slipped to its weakest in the current 15-month upturn since the lows of the Covid-19 crisis.

This was slowed due to lower demand from foreign companies for exports and higher prices due to inflation putting off some firms from spending.

Transportation issues and the war in Ukraine also affected spending as companies waited to see how the situation turned out.

The conflict has been pushing up costs, with 85% of manufacturers reporting an increase in purchase prices paid for goods, while the rate of inflation at consumer goods producers hit record highs too.

Prices were up across the board in the sector, with bosses reporting increases on chemicals, energy, food, freight, fuels, gas and metals, among others.

Manufacturers in turn passed on costs to customers, with almost 61% saying they have increased prices. Less than 1% said prices charged have fallen.

The small increases in production and new orders did improve the employment situation for the sector, with jobs rising in April for the 16th consecutive month.

There were also reported improvements in delivery delays compared with the start of the year, as the worst of the supply chain crisis seen during the pandemic eased – although recent Chinese lockdowns are expected to affect the sector this month.

Rob Dobson, director at S&P Global, which conducts the survey, said: “The improved expansion of output at manufacturers, while positive in itself, failed to mask the continued headwinds buffeting the sector at the start of the second quarter.

“New business growth near-stalled as a slowdown in the domestic market was accompanied by a further deterioration in export orders.

“Manufacturers and their clients are struggling as lockdowns in China and the Ukraine war exacerbate stretched global supply chains, the inflationary picture worsens and geopolitical tensions rise.

“Specific to the UK, Brexit represents an additional headwind, notably via lost EU customers, increased paperwork, customs checks and border delays.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), said: “In spite of the softer rate of expansion in new business, the manufacturing sector held its ground in April, benefiting from work already in hand and recent easing of supply chain stresses.

“However, it is difficult to see where ongoing growth will come from in the coming months as new order growth was the most sluggish in over a year.

“Higher costs and shortages took a bite out of potential opportunities, with clients hesitating to place orders and Brexit obstacles weighing down as work from overseas shrank for a third month in a row.”

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