The latest CIPS UK Manufacturing Purchasing Managers’ Index has announced the lowest level of activity since early 2013 at 48.2 in July. This is down from 52.4 in June. The decline in production was the largest since October 2012 across all sectors including consumer, intermediate and investment goods.
Commenting on the findings, Mike Thornton, Head of Manufacturing at RSM, said:
‘As the Brexit decision sinks in, UK manufacturers are now looking towards the future to mitigate risk and implement strategies to deal with the changing market conditions.
‘With a PMI of 48.2, July sits as the lowest month since 2013 which is not unsurprising due to the levels of uncertainty in the sector, although there is some positivity with exports orders up on the back of a weak pound. This was down on the estimates due to sluggish overseas demand, but the weak pound could still present further opportunities for exporters as the dust settles following the Brexit decision.
‘The level of employment in the sector has fallen for the seventh month in a row due to a combination of natural wastage, restructuring, redundancies and outsourcing. Whether this is as a direct result of Brexit or companies taking steps to rationalise pre-existing reduction plans remains to be seen, but the decrease in employment could further fuel skills shortages within the manufacturing sector in the longer term
‘Getting into the detail of the figures, the sharpest drop in both output and new orders was in the intermediate goods sector which could be a precursor to an expected drop in order rates over the coming months. With similar trends reported on the back of recent surveys from EEF and SMMT, we are starting to see powerful evidence for swift governmental policy action on trade agreements, free movement of labour, tax and funding for innovation to avert the downturn becoming more embedded.’