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UK manufacturers continue recovery from COVID-19 slump

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
EBBW VALE, WALES, - SEPTEMBER 25:  A general view of a member of staff at Cwmtillery Glass factory placing a spacer on the units before being filled with argon gas and sealed as a unit on September 25, 2020 in Ebbw Vale, Wales United Kingdom. (Photo by Huw Fairclough/Getty Images)
Rates of expansion in output and new orders in UK manufacturing remained solid in September. Photo: Huw Fairclough/Getty Images

The UK’s manufacturing sector continued to recover from its COVID-19 slump last month, according to a leading private sector survey published on Thursday.

IHS Markit’s UK manufacturing Purchasing Managers Index (PMI) showed steady growth in output and new orders in September, although job losses continued for the eighth month in a row.

Manufacturing PMI was 54.1 in September. PMIs are measured on a scale of 0 to 100, with anything above 50 signalling growth and anything below marking contraction.

READ MORE: UK economic recovery 'fading' even before new coronavirus restrictions

Economists had been expecting a reading of 54.3, in-line with an earlier “flash” estimate last week. That was down slightly from August’s reading of 55.2. August marked the fastest growth in the UK manufacturing sector since 2014, as the easing of COVID-19 restrictions led factories to restart production across the country.

“Although rates of expansion in output and new orders lost some of the bounce experienced in August, they remained solid and above the survey's long-run averages,” said Rob Dobson, director at IHS Markit.

“Business sentiment remained positive as a result, with three-fifths of UK manufacturers forecasting a rise in output over the coming year.”

Dobson said the picture could darken in the coming months as the government’s flagship support job schemes comes to an end and the Brexit transition period draws to a close.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which helped put the survey together, said the “glass remained half full” but warned: “It is anyone’s guess whether more lockdown disruptions derail this hope.”

“The uphill struggle for manufacturers starts now,” said Fhaheen Khan, economist at manufacturing industry group Make UK.

“We must forge a long-term plan for recovery starting with a revitalised Industrial Strategy that places manufacturing on the forefront and provides extra support to those key strategic industries that are still vulnerable.”

Earlier on Thursday, a separate IHS Markit survey showed growth in eurozone manufacturing at its strongest level in two years in September. The performance was driven largely by Germany, Europe’s traditional industrial engine.

READ MORE: Rolls-Royce asks shareholders for £2bn to deal with COVID-19 blow

Chris Williamson, chief business economist at IHS Markit, said European firms were “more upbeat about prospects for the year ahead, with optimism returning to the highs seen before the trade war escalation in early 2018.”

Separately on Thursday, Rolls-Royce, one of the UK’s biggest manufacturing businesses, announced plans to raise up to £5bn ($6.4bn) in debt and equity to repair its balance sheet. The business has been battered by the COVID-19 crisis, which has led to falling demand for its aircraft engines.

Watch: What is a recession?