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UK Manufacturing Falls Sharply in October

Following stronger than expected growth in the post-Brexit months, it had appeared that the UK’s manufacturing industry had found a strange success. The falling value of the pound meant that for companies buying British from abroad, our goods were significantly cheaper than they had been before.

On the other side of that coin, the cost of buying materials from abroad jumped in price for British manufactures, and surveys indicated that investment into UK manufacturing businesses was put on hold amid the uncertainty.

Nevertheless, the jump in export orders meant that manufacturing growth grew steadily into September. However, if numbers from the Office for National Statistics (ONS) are to be believed, that growth came to a shuddering hold in October.

A new study from the ONS suggests that output from manufacturers fell by 0.9%, down significantly from the growth of 0.6% seen in September. In total, industrial production dropped by 1.3% in October after falling 0.4% in September, marking the biggest fall in overall production within the UK since August 2013.

The ONS point to the temporary closure of a major oilfield as part explanation of the fall, saying "The increase can largely be attributed to continued maintenance to the Buzzard oilfield in the North Sea," but economists were still surprised by the numbers, which had been predicted to be positive.

The fall in industrial production has dealt a blow to the UK’s GDP growth prospects in the final quarter of 2016.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "With much of the latest survey evidence being decent and retail sales surging in October, we had believed that there was a good chance that UK GDP growth in the fourth quarter could match the resilient 0.5% quarter-on-quarter achieved in the third quarter,"

"October's 1.3% drop in industrial production puts a significant dent in fourth-quarter growth prospects, as it now looks odds-on that the sector will contract in the fourth quarter and possibly markedly - even allowing for the fact that there could be a marked bounce-back in oil and gas extraction as the oilfield comes back into operation.

"While industrial production only accounts for 14.6% of total output, contraction would be a blow”, he further stated.

Indeed, these numbers come as a surprise to most manufacturers like us, who produce BSP fittings for clients around the world, primarily from British sources materials. Nevertheless, it’s clear from the ONS numbers that certain areas of the UK’s manufacturing industry have suffered significantly during October.

Markit, meanwhile, suggested that October was a strong month for manufacturing growth, setting the PMI for October at 54.2 – significantly higher than the 50 which marks an unchanged sector, They did, however, suggest that manufacturing output was beginning to fall, albeit still in the positive numbers.

It’s unclear at this time whether CIPS will respond to the ONS report, but with significant discrepancies between the two it wouldn’t be a surprise to hear more about this as we approach the end of the calendar year.

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