Election and Brexit concerns weigh on UK manufacturing supply chains

The UK manufacturing downturn continued in November, as businesses were forced to respond to the delay to Brexit and a fresh injection of uncertainty from the forthcoming general election.

According to IHS Markit output, new orders and employment all fell, while de-stocking activity resumed as firms depleted buffers built-up in advance of the postponed exit date.

Rob Dobson, director at IHS Markit, which compiles the survey, said: “Signs of a two-speed economy persisted, with intensifying business uncertainty leading to a further steep drop in demand for machinery and equipment as firms cut back on investment, but rising demand for consumer goods suggests that households continue to provide some support to the economy”

The IHS Markit/CIPS Purchasing Managers’ Index for November said that the delay to Brexit had a noticeable impact on stock holdings and purchasing activity during November. It warned that finished goods inventories fell at the steepest rate in over two-and-a-half years, while input buying volumes fell to one of the greatest extents since early-2013.

It said that these contractions were a “marked reversal” from the solid increases seen in the lead-up to the 31 October exit date.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said that a “heavy sense of inevitability hung around the sector in November” as it continued to suffer the effects of Brexit uncertainty, slowing global growth and an impending general election.

“Supply chain managers cited weakened domestic demand and one of the biggest falls in export orders for seven years as companies unravelled their pre-Brexit stocks and resulting in one of steepest reductions in purchasing since 2013,” he said.

“Inevitably, where new orders fall, jobs are sure to follow and manufacturing employment fell at its fastest pace since September 2012. Firms tried to balance their books by reducing overheads and improving efficiencies quickly, and staff numbers were the casualties.

“With this backdrop of pressures, the sector’s performance is unlikely to change any time soon, which means a bleak beginning for the industry in 2020,” Brock warned.