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UK manufacturing still suffering despite Brexit stockpiling boom

Tom Belger
·Finance and policy reporter
Boris Johnson wears protective eyewear and a hard hat as he tours construction work underway
UK prime minister Boris Johnson won't like latest manufacturing figures. Photo: Dan Himbrechts/AFP via Getty Images

UK manufacturing continued to slide in October despite a boom in orders as EU customers stockpiled goods, a new survey shows.

Figures on a widely watched index smashed through analysts’ expectations, with factories’ activity at its highest since April.

But factories’ output is still shrinking month on month, according to data from the IHS Markit/CIPS UK manufacturing purchasing managers' index (PMI).

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), said: “A minor uplift in overall purchasing activity did little to ease the agony for manufacturing companies in October, as the sector remained submerged in contraction terrain and heading for recession.

“Business was still restrained by the Brexit leash, as firms were subjected to the struggle against client indecision and also the downpull of a slowing global economy.”

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He added: “Domestic clients packed up and went home without placing orders, leaving the sector to survive on a handful of stockpiling purchases from clients in the EU.”

Its headline figure put performance in October at 49.6, on a scale where figures above 50 illustrate growth and below illustrate contraction.

That marked a decline for a sixth month in a row, but an improved performance on the previous month’s 48.3 figure. Analysts had expected activity to slide to 48.1.

The performance was ‘flattered’ by a stockpiling rush as manufacturers prepared for the serious risks of disruption from a no-deal Brexit on 31 October.

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But the cliff edge passed as MPs forced the UK government to request another Brexit delay, with firms now counting the cost of the stockpiling and contingency planning for the second time this year.

"The underlying picture looks even darker than even these disappointing headline numbers suggest," said IHS Markit director Rob Dobson.

"Output and new orders fell despite short-term boosts from stock-building activity in advance of the October 31 Brexit deadline, which included a rise in exports as clients in the EU sought to mitigate supply risk."

IHS Markit said Brexit uncertainty had hit investment goods the most, with firms’ customers cancelling capital projects.

He added: "With a further Brexit extension confirmed and the prospect of a December general election, it looks as if the spectre of uncertainty will cast its shadow over manufacturing for the remainder of 2019.”

Seamus Nevin, chief economist at manufacturing body Make UK, said it was no surprise orders were falling given the global slowdown.

“Job cuts have happened for the seventh consecutive month with the rate of decline among the sharpest in a decade.

“Many manufacturers had some form of shutdown planned, while others were engaged in expensive stock building activities in preparation for potential no deal shocks to their supply chain. This together with the continued Brexit and now electoral uncertainty means there is no end in sight to the roadblocks industry is facing.”