LONDON: Activity in Britain’s manufacturing industry has stalled, with companies cutting jobs as export orders continue to disappoint.
Factories across the UK are struggling against the headwinds of weaker global growth, the commodity price slump hitting investment in the oil and gas sector and the historic strength of sterling.
The Markit/CIPS survey of purchasing managers recorded another month of near stagnation, with the index broadly flat at 51.0 in March, close to February’s 34-month low of 50.8, with 50 being the neutral point that indicates flat activity.
Rob Dobson, senior economist at survey compilers Markit, said that the sector “remained in the doldrums” and will struggle to make any contribution to overall growth.
Some analysts believe the sector will pick up in the second half of the year as the sharp decline in the value of sterling starts to feed through to bottom lines and make exports more competitive.
Sterling fell to a new 16-month low against the euro on the weaker than expected survey data.
It is unclear to what extent uncertainty about the prospects of a British exit from the EU is impacting on investment decisions and orders.
The domestic market remains the main source of new contract wins for manufacturers, the PMI survey suggests, reinforcing the extent to which consumer consumption is driving the economic recovery.
By contrast, new export business declined for the third straight month. While there were reports that small businesses were still hiring, jobs were lost at larger businesses.
On Thursday, the Office for National Statistics reported that business investment had fallen in the final quarter of 2015 and that it was private consumption that drove the upward revisions to gross domestic product growth.
Elizabeth Martins, an economist at HSBC, said in a note to clients that “the old imbalances remain very much in place”.
Lee Hopley, chief economist at the EEF manufacturers’ association, said that while there are still “pockets of growth” in the sector — notably in areas such as chemicals and electronics — the overall picture was subdued.
“There isn’t anything in this, or other surveys of late to suggest that manufacturing will make much of a dent in the imbalanced growth across the UK economy in the coming quarters,” she added.
