Job creation within UK manufacturing at 35-month high

Posted on 1 Jun 2017 by Jonny Williamson

UK manufacturing employment has risen for the tenth consecutive month in May, with rate of jobs growth the fastest since June 2014, according to the latest Markit/CIPS Purchasing Managers’ Index (PMI).

Stock manufacturing factory paint shop automotive
Employment rose for the tenth consecutive month in May, with the rate of jobs growth reportedly the fastest seen since June 2014.

The UK manufacturing sector sustained its current growth momentum, with May’s PMI standing at 56.7 – only slightly down on April’s 57.3, a three-year high.

Manufacturing production and new orders both reportedly expanded at above survey average rates, thanks to the ongoing strength of the domestic market and a solid rise in export business.

Once again, the weak sterling exchange rate is proving beneficial to UK manufacturing exporters, with more businesses being prompted to promote and launch new products in foreign markets. Incoming new export orders rose for the thirteenth straight month.

Expansion has had a largely positive impact on UK manufacturers’ business sentiment and job creation. Optimism regarding the outlook for production levels in 12 months’ time rose to a 20-monh high, with more than half (56%) of businesses forecasting output to increase.

Employment rose for the tenth consecutive month in May, with the rate of jobs growth reportedly the fastest seen since June 2014.

Chief economist at EEF, Lee Hopley, explained: “A modest retreat from last month’s near three-year high continues to signal that the UK manufacturing is in good shape. Output and orders expansion is being driven by resilient demand coming through UK supply chains and a better looking global economy than UK manufacturers have been used to for some time.

“The familiar story of cost pressures following commodity price rises and a weaker sterling still coming through the pipeline will continue to play a role in dampening the spirits of UK consumers. The growing demand for employees in the manufacturing sector should however provide additional support for ongoing positive labour trends, though will do little to help with the growing productivity challenge.”

Head of manufacturing at Barclays, Mike Rigby commented: “Fears of a 2017 slowdown don’t yet seem to be feeding through to the UK manufacturing sector as it continues to report growing levels of investment and employment, as well as healthy order books.

Manufacturers are embracing servitization in order to deliver greater customer value and generate recurring revenue streams – image courtesy of Pixabay.
The weak sterling exchange rate has continued to prove beneficial to UK exporters – image courtesy of Pixabay.

“Exporters have continued to take advantage of a weak sterling, which has kept British exports competitive on a global stage, and at a time when the world economy is showing signs of improvement. However, rising cost pressures are still circling, not only from elevated import costs, but also from the growing effect of domestic costs from sources such as energy and staffing which will all contribute to fuelling inflation.

“Although manufacturers have resisted passing on these costs to date, the expectation of price rises is becoming more apparent in the sector.”

UK head of manufacturing at Lloyds Bank Commercial Banking, Dave Atkinson said: “Manufacturers are continuing to take advantage of the low value of sterling and creating new relationships in existing and emerging markets, with many using this opportunity to build on Britain’s reputation for world-class, quality manufacturing.

“At home, there are more challenges as firms are facing inflationary pressures and a slow-down in consumer spending. Many are responding by implementing price rises and our Working Capital Index shows that the sector has been buying stock at the fastest rate in six years as a hedge against rising import costs.

“While a third successive month of decline is disappointing, we see a sector that continues to expand, which we hope will see confidence remain above the long-term average in the months to come.”