Over the course of the Brexit debates, the manufacturing industry became nothing short of a political football. Both sides claimed that manufacturing would be stronger, but as with all things Brexit, it was more ‘wait and see’ than anything concrete.
Results from June indicated that manufacturing was doing just fine, growing in strength and beating analysts’ predictions for growth in the sector. However, those numbers only took into account one week of post-Brexit manufacturing information, and therefore were not much of an accurate indication of what manufacturing in Britain might be like once we’d voted to leave.
Now, Markit have published their monthly survey of the UK’s manufacturing sector and it makes for reasonably gruesome reading for those of us with an interest in the sector. The manufacturing PMI stood at just 48.2, well below the 50 point reading which separates growth from contraction and well below the 49.1 ‘flash’ estimate that they produced on the 22nd of July.
Those numbers suggest that the UK’s manufacturing activity contracted at its fastest rate since February of 2013 and follows the generally downwards trend witnessed over the last year.
Additionally, their report shows that employment within manufacturing has once again decreased, now hitting 7 straight months of declining numbers. In July, the rate of job losses was the second-fastest for almost three and a half years, Markit have confirmed. According to manufacturers surveyed, this is because of declines in both output and new orders. That’s borne out by a reading of 48.3 in the fresh orders index.
David Noble of CIPS said that manufacturing, which accounts for 10% of the UK’s GDP had taken a step backwards since the Brexit vote, saying: “Though these falls were not as marked as those seen during the Great Recession in 2007-2008 the drop was harsher than expected…Without new orders coming through, this downward trajectory is likely to get worse, at least in the short term.”
There’s also some significant uncertainly regarding the future of Britain’s trade relations with the European Union. The manufacturing sector is heavily reliant on the sales it makes to the European Union and the prospect of drawn out relations with Europe have put a significant damper on confidence.
It’s also led to a weaker pound, which has meant that it’s now cheaper to buy from inside the UK. Anecdotally, here at Custom Fittings we’ve seen increased domestic orders for products like dowty seals since the Brexit vote.
So, what does all this mean for the UK’s manufacturing industry? Well, more than anything else, it means uncertainty. That can affect the industry in a number of ways, but generally it means that investment and spending in the sector will drop off until we can see the light at the end of the tunnel.