Yet more bad news for the beleaguered UK manufacturing industry today. Following months of speculation regarding the UK’s future participation in the European Union and doubts over UK steel production, we have now witnessed the first contraction in the market for three years. Sales for BSP Fittings and all the products at Custom Fittings are holding up well
The Markit/CIPS manufacturing Purchasing Managers’ Index fell to 49.2, down from the 50.7 registered in March. The PMI is written in such a way that a reading of above 50 is growth, and a reading below 50 indicates a contraction. As we’ve covered on this blog before, the manufacturing industry’s PMI score has been in steady decline over the last year, pointing towards a number of failings within both the market and governmental policy.
Businesses are blaming soft domestic demand, a fall in business from overseas (likely due to the strength of Sterling) and uncertainty surrounding the EU referendum. Another (largely ignored) issue for the UK is a slowdown in the oil and gas industry. Oil prices have been driven down considerably over the last year and demand for gas has weakened, leading to tough times for the industry.
Rob Dobson, a senior economist at Markit said: "On this evidence manufacturing production is now falling at a quarterly pace of around 1%, and will likely act as a drag on the economy again during the second quarter and putting greater pressure on the service sector to sustain GDP growth.
The manufacturing labour market is also being impacted, with the data signaling close to 20,000 job losses over the past three months."
In addition, the Markit/CIPS survey found that new export orders contracted for the fourth straight month in April as the global economy continued to slow down. Employment opportunities in the manufacturing sector were also below the 50 mark, marking the fourth straight month of fewer jobs available in the industry.
Figures released towards the end of last month showed that UK economic growth slowed to 0.4% in Q1 2016, down from 0.6% in Q4 2015. At present, the UK’s economic growth is almost entirely dependent on a strong service sector, but if the UK’s manufacturing industry continues to decline, it could contribute to a UK economy once again in recession.
That’s a view shared by David Noble, the group chief executive at the Chartered Institute of Procurement and Supply, who said that “Recent fears over a stall in the UK's manufacturing sector have now become a reality.
"An atmosphere of deep unease is building throughout the manufacturing supply chain, eating away at new orders, reducing British exports and putting more jobs at risk.
"A sense of apprehension across the sector is being caused by enduring volatility in the oil and gas industry, falling retailer confidence and the uncertainty created by the EU referendum."
As for the EU referendum’s impact on these results, we don’t truly know. Those keen to stay in the EU, including many businesses, are claiming that prospect of leaving is turning many investors away from the country. Meanwhile, the ‘leave’ group say that falling revenues are because of Europe, and our expenditure in that area.