Yahoo Finance UK manufacturing downturn deepens in May
The downturn in UK manufacturing worsened last month as weak domestic demand hit the market, according to a survey.
The S&P Global / CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to a four-month low of 47.1 in May, down from 47.8 in April but above the flash estimate of 46.9. Any figure below 50 indicates a contraction.
The sector has recorded a score below 50 for 10 months in a row.
Manufacturers were hit by weak domestic market sentiment, lower new export order intakes and client destocking, which offset benefits from improving supply chains.
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New export orders fell for the sixteenth consecutive month in May, as overseas demand for UK manufactured products remained lacklustre.
UK manufacturers reported that some of their EU customers are switching to local sources to avoid post-Brexit trade and transportation complications.
That contributed to weaker demand from Europe, and an overall drop in new export orders fell for the sixteenth consecutive month in May.
Rob Dobson, director at S&P Global Market Intelligence, said: “The UK manufacturing downturn deepened in May, with output, new orders and employment all falling at increased rates.
“Manufacturers are finding that any potential boost to production from improving supply chains is being completely negated by weak demand, client destocking and a general shift in spending in the UK away from goods to services.
“Although near-term conditions remain challenging overall, manufacturers are still finding reasons for optimism including brighter news on the price and supply fronts.
“The recent healing in global supply chains is also continuing apace, with lead times shortening to a near-record extent in May.”
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KPMG’s UK head of industrial products Glynn Bellamy inflation and interest rates remained were putting pressure on UK manufacturers.
He said: “Softening demand continues to impact manufacturing output. Destocking is also playing a role, as supply chain concerns and lead times ease.
"Lower demand has been partially offset by reducing input costs including energy, but inflation and interest rates remain high in relative terms.
“It is important that manufacturers use their recent high cost experiences to drive through further operational improvement and make the investments needed for UK plc to reduce its exposure to energy shocks, remain competitive and benefit from the expected medium term recovery - albeit in the context of an increasingly competitive global market.”
Maddie Walker, Industry X lead for Accenture in the UK, said: “With continued pressures on consumers dampening demand for new orders, the UK’s manufacturing sector remains on distinctly rocky ground at a four-month low. However, there are signs ahead that manufacturers continue to be optimistic about, such as the prospect of lower energy bills and inflation gradually abating, which are already beginning to reduce input costs for many. Those that continue to invest in digital technology and workforce skills for the future can build resilience and will be in a stronger position for growth when domestic demand returns.”
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