The fate and future of Britain’s manufacturing industry has been a topic of much debate over the last few months, but that doesn’t mean the market itself has been questioning its own future. Indeed, a new survey of manufacturers has found that in the month of the EU referendum, the UK’s manufacturing economy grew at a steady clip.
According to the Markit/CIPS purchasing managers’ index, the UK’s manufacturing industry grew during June at its fastest rate in months, rising to 52.1. A reading of 50 indicated stagnation, so anything above that is deemed as growth. This comes just two months after the UK’s manufacturing economy fell into a brief period of contraction, back in April. It’s great news for the UK’s economy going forward, and will surely be a boon to the new Prime Minister, Mrs May.
Economists had predicted growth, but not at the level suggested by Markit’s analysis. The sector makes up around 10% of the UK’s total economic output. However, over Q2, manufacturing is set to show a decline of around 0.5%, following the weak performances found in April and May.
During those fallow months, economists had been warning that uncertainty surrounding the UK’s potential exit of the EU was dampening the manufacturing industry’s ability to perform. However, with June proving that theory somewhat invalid, further questions have to be asked why manufacturing performed so worryingly during that period.
Also of great concern is that though there were higher sales to the US, Europe, Russia and East Asia, the sector posted job losses for its sixth month in a row. That’s a worrying trend, and one which isn’t promising to let up any time soon, especially with negotiations between the UK and EU ongoing, and the future of British exports to the EU in serious doubt.
In regards to the EU, it’s unclear what the referendum vote will actually mean for the future of our manufacturing industry. In the short term, the collapse of pounds value has meant that it’s cheaper for companies around the world to buy from Britain.
However, that also means that it’s more expensive for British companies to source parts from overseas. As such, we’ve seen an increase in domestic orders for products like dowty seals, banjo bolts and banjo fittings over the last couple of months.
In the longer term, the UK’s decision to leave the EU could have major consequences for the manufacturing industry. Over the next three years, the UK will negotiate a new position within the world, one with a huge number of unknowns. That could drive support away from manufacturing in the medium term, and depending on how the negotiations progress, could mean almost anything for the sector.
On the subject of this month’s report, Markit’s senior economist Rob Dobson said: “The latest PMI signalled that manufacturing has started to move out of its early year sluggishness. There were signs that the trend in new export business was starting to pick up.”