The UK manufacturing sector hit an 11-month low in December, with output, employment and new orders all falling at faster rates, new figures released yesterday show.
According to the latest seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ Index™ (PMI®), the manufacturing sector’s downturn continued as the year ended, reflected in a PMI of 47.0 in December, down from 48.0 in November. This is now the third month in a row that the PMI has remained below the 50.0 mark, which signals contraction or growth in the sector.
Furthermore, business optimism also fell last month, hitting a two-year low, with manufacturers citing market confidence, inflationary pressures, rising costs (especially for employer NI and payrolls) and expectations of weaker economic growth looking ahead as primary factors.
Eurozone ends 2024 in contraction
In Europe, manufacturers are also feeling the heat, with the Eurozone sector also ending the year in a state of contraction.
The HCOB Eurozone Manufacturing PMI was 45.1 last month, a three-month low, with new factory orders and output both falling. However, Eurozone sector confidence hit a four-month high in December, as
Moreover, countries in Southern Europe continued to punch above their weight, with Spain and Greece showing stronger improvements in manufacturing sector
conditions. But this was more than offset, however, by the big-three of Germany, France and Italy, which all posted deteriorations once again. Most notable was France, which saw its Manufacturing PMI sink to its lowest level since May 2020.
Commenting on the latest UK Manufacturing PMI figures, Rob Dobson, Director at S&P Global Market Intelligence, said: “A stalling domestic economy, weak export sales and concerns about future cost increases led to the steepest contraction of UK manufacturing production for almost a year in December.
“Manufacturers are facing an increasingly downbeat backdrop. Business sentiment is now at its lowest for two years, as the new Government’s rhetoric and announced policy changes dampen confidence and raise costs at UK factories and their clients alike. SMEs are being especially hard hit during the latest downturn.
“This is sending a winter chill through the labour market. December saw the sharpest cuts to staffing levels since February. Some companies are acting now to restructure operations in advance of the rises in employer National Insurance and minimum wage levels in 2025. Global market conditions are also providing a growing headwind, with export sales hit by lower demand from Europe, Asia and the US.
“The survey price gauges edged higher, reflecting rising transportation, labour and material costs, in some cases due to supply chain stresses pushing up global market prices. With costs expected to rise again in early-2025 as the announced Budget changes come into actual effect, the Bank of England is likely to remain cautious about further interest rate cuts despite rising signs of economic difficulties.”
For more articles like this, visit our Leadership channel.
