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Manufacturing sector hits 31-month low in new survey

The UK’s manufacturing sector ended 2022 with its worst month for over two and a half years, a report has found.

The companies saw falls in output, numbers of new orders received and stocks, while prices continued to rise, although at a slower rate than before.

The S&P Global/CIPS UK Manufacturing PMI scored 45.3 in December, down from 46.5 in November, figures released on Tuesday show. Scores below 50 are considered to show that the sector is shrinking.

It is the sector’s worst performance for 31 months, and apart from the early days of the pandemic, one of the one of the worst since mid-2009.

“Output contracted at one of the quickest rates during the past 14 years, as new order inflows weakened and supply chain issues continued to bite,” said Rob Dobson, director at S&P Global Market Intelligence.

“The decline in new business was worryingly steep, as weak domestic demand was accompanied by a further marked drop in new orders from overseas.”

It is the fifth month in a row that the manufacturing PMI score has shown that the sector is in decline, while production fell for the sixth consecutive survey.

Exporters reported low demand from China, the US, mainland Europe and Ireland, largely due to weak economic conditions around the world.

Some companies also mentioned shipping delays, higher costs and other issues all linked to Brexit.

“Clients are increasingly downbeat and reluctant to commit to new contracts, not just in the UK but also in key markets like the US, China and the EU,” Mr Dobson said.

“The weakness in the latter is still being exacerbated by the constraints of Brexit, as higher costs, administrative burdens and shipping delays encourage increasing numbers of clients to shun trade with the UK.”

The pressure on the sector continued to impact staff, as the number of people employed by manufacturers dropped for the third month in a row. It was the steepest fall since October 2020.

Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply, said: “All these black spots managed to overshadow some of the improvements for manufacturers such as a further easing in supply-chain delays or the higher rates of activity in the investment goods sector or input price inflation easing to a two-year low.

“The overarching concerns remain that there is little power in the UK economy’s engine of growth for 2023 and manufacturers were painfully aware of this as business expectations remained at historically low levels again.”