UK factory growth accelerated in November, with EU firms increasingly stockpiling British goods amid fears of Brexit disruption.
A majority of manufacturers in a leading industry survey report busier trade over the past month, with the pace of expansion accelerating compared to October. Analysts had expected growth rates to remain unchanged month-to-month.
Purchasing managers’ index (PMI) data published on Tuesday showed production at almost a three-year high.
The headline PMI figure was revised up from an estimated 55.2 to a final reading of 55.6 in November, up from 53.7 last month. Scores are an index where readings above 50 show most firms expanding and below 50 show decline.
“Growth of the UK manufacturing sector picked up in November, temporarily boosted by 'Brexit-buying' among clients and the ongoing boost from economies re-opening following lockdowns earlier in the year,” said Rob Dobson, director at IHS Markit, which compiles the survey.
“The upcoming end to the Brexit transition period...led to rising levels of input purchasing, stockpiling of raw materials and stronger gains in new export business as EU-based clients brought forward orders,” reads IHS Markit’s report, produced with the Chartered Institute of Procurement & Supply (CIPS).
The UK government urged British firms to step up preparations for the end of the Brexit transition period on Tuesday. Only 30 days remain until Brexit goes ‘live,’ as one think tank puts it, with a continued impasse in trade talks.
Exporters and importers face new administrative and logistical hurdles even if a deal is struck, with some hopes of a last-minute agreement this week. If no deal is secured, severe disruption widely expected in the short term, and price hikes and damage to UK exporters and economic competitiveness in the long run.
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Manufacturers’ continued expansion also comes in spite of the resurgence of the coronavirus and restrictions in both the UK and Europe in recent months. Factories have been allowed to remain open throughout England’s November lockdown.
The headline figures hide declining output for consumer goods firms, however. Dobson highlighted the impact of “depressed household sentiment caused by mounting job losses and the UK re-entering lockdown.”
Dobson said it was “highly uncertain” UK factory growth could be sustained into the New Year as stockpiling wanes. Employment slid for a 10th month in a row in industry, with manufacturers “very concerned about the outlook and generally reluctant to expand capacity.”
PMI data for eurozone manufacturers earlier on Tuesday also showed expansion in November, though at a lower rate than in October and than in the UK.
The final headline figure for the bloc came in at a 53.8, with growth strongest in Germany but output contracting in Spain, France and Greece.
IHS Markit said it marked a “decent pace” of growth, but noted output was close to stalling when Germany, Europe’s largest economy, was excluded. EU firms were more optimistic than a month earlier on hopes of lockdowns easing and vaccine breakthroughs.