UK manufacturing dips in September, but still performs strongly

UK manufacturing continued to expand during September with production and new orders both rising at above long-run average rates, the latest Markit/CIPS Purchasing Managers’ Index has revealed.

UK Manufacturing UK Exports Export Barrier Free Trade Exporting Supply Chain Stock Image
Growth of new export business remained among the best registered over the past six and a half years, with increased sales to Europe, the US, China and Brazil.

UK manufacturing registered 55.9 in September, down slightly on August’s four-month high of 56.7, but well above its long-run average of 51.7.

The latest PMI has seen manufacturing production rise for the fourteenth consecutive month in September; with cost inflationary pressures due to rising commodity prices, the exchange rate and increased supply chain pressures cited as causing the marginal contraction.

Growth of new export business remained among the best registered over the past six and a half years, with increased sales to Europe, the US, China and Brazil.

The outlook for UK manufacturing remained positive, with September seeing more than half (51%) of companies reporting they expect production to rise over the coming year. Optimism reflected continued efforts to expand overseas, improve efficiency, investment plans and new product launches.

Although September’s rate of job creation was below August’s three-year record, it remained positive and broad-based.

Dave Atkinson, UK head of manufacturing at Lloyds Bank Commercial Banking, commented: “Sentiment in the industry is good and companies are putting plans in place for continued growth, such as boosting export orders, increasing productivity and developing new products.

“The annual MHA Manufacturing and Engineering report released last month found that despite the uncertainty from Brexit, the majority of businesses have achieved growth over the past 12 months and remain optimistic about the future.

“While there are challenges ahead, notably around the value of sterling and the recruitment of skilled workers, the sector is in a strong position. We expect this to continue in the coming months.”

Head of manufacturing at Barclays, Mike Rigby noted: “Although slightly down from August’s high, manufacturers continue to report healthy order books and encouraging levels of new investment and employment keeping output in positive territory last month.

“Yet, at a time when we are seeing the fastest pace of innovation in technology there has ever been, it’s frustrating to see manufacturing still stuck in a period of low growth. The benefits of a weak sterling and an improving global economy may not amount to much for the sector unless it invests more to improve efficiency and ramp up capacity.

“With cost pressures remaining elevated and margins being increasingly squeezed, it’s only a matter of time before manufacturers raise prices which will likely impact the domestic demand that has been fuelling growth in the sector.”