With all aspects of the UK’s economy under the microscope following the announcement that the UK would be sent to the polls once more for a general election, there’s no shortage of opinions flying around.
Some suggest that the UK must make a clean break from Europe and seek to amass as many trade deals as possible in order to secure a long-term future for the manufacturing industry, whilst others suggest that attempting to maintain some kind of trading alliance with the EU is preferable. Those debates will inevitably rage on, but meanwhile, the UK’s manufacturing sector has posted the fastest growth witnessed for three years.
Manufacturing output surged in April, according to the latest survey by Markit/CIPS, hitting 57.3, up from 54.2 seen in February. Any number above 50 signals growth. Those numbers are not only deeply impressive, they’re also unexpected – economists surveyed by Reuters had predicted that the reading would fall slightly to a flat 54.
Instead, the PMI (purchasing managers index) hit a 3-year high, predicated on the back of stronger orders from North America, Europe, Africa and Brazil, boosted by a weak exchange rate and a stronger global economy making British goods like cars, pharmaceutical products and hose fittings.
Pleasingly, there was also growth reported across employment and firms stocks of purchases – indicating a healthy industry that’s weathering the Brexit storm with relative grace.
“The big question is whether this growth spurt can be maintained, especially given the backdrop of ongoing market volatility and a number of political headwinds such as elections at home and abroad,” said Rob Dobson, an economist at Markit, who produced the report.
“Other surges seen since the middle of last year have generally proved short-lived, as weak wage growth sapped consumer spending. If this happens again it will inevitably constrain manufacturing, even as the investment and intermediate goods producing sectors continue to expand.”
Other economists, like George Buckley of Nomura, have noted that these monthly shifts in the manufacturing PMI are typically reversed in the next month, and that’s it’s often unfair to judge an industry on a monthly performance alone. Nevertheless, Lee Hopley of the EEF manufacturers’ group is upbeat about the industry.
“Against all expectations nine months ago, UK manufacturing appears to be in rude health, having navigated significant exchange rate swings and rising input costs, companies are capitalising on the upswing in the world economy and pressing ahead with some new investments,” she said.
Though the UK maintains a high level of pride in our industrial past, today it is very much that – the past. Just 10% of the UK GDP comes from the manufacturing sector. The government have indicated that a strong manufacturing sector is crucial to our success out of the European Union, though little by way on concrete policy to improve the standing of manufacturing has come about since then.