Coronavirus: UK manufacturing output grows at fastest pace since 2014

Edmund Heaphy
·Finance and news reporter
·2-min read
File photo dated 10/10/2019 of workers on the production line at Nissan's factory in Sunderland. Car giant Nissan has stressed that its UK plant remains an "important part" of its business after announcing the closure of a factory in Spain.
UK car production fell to its lowest monthly output since World War II in April. Photo: PA

UK manufacturing sector output grew at its fastest pace since May 2014 last month, as the easing of coronavirus restrictions prompted firms to rapidly scale up production.

A closely watched survey by IHS Markit found that the sector’s purchasing managers’ index reading came in at 55.2 in August, broadly in line with expectations.

The figure, up from 53.3 in July and well above April’s record low of 32.6, indicates the fastest pace of overall growth within the sector since February 2018.

PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.

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The rapid increase in output reflected “solid expansions” across several sub-sectors, according to IHS Markit.

The sector saw the biggest increase in new orders since November 2017, with the domestic market serving as a “prime source” of new contract wins, it said.

New orders from export markets also rose for the first time in 10 months, with firms reporting improved demand from the Europe, Middle East and Africa (EMEA) region, North America, and Australia.

“The recovery of the UK manufacturing sector gathered pace in August. Output expanded at the fastest rate in over six years as new work intakes rose to the greatest extent since November 2017, led by an upturn in domestic demand and signs of recovering exports,” said Rob Dobson, a director at IHS Markit.

“However, companies report that the current bounce is mainly driven by the restarting of manufacturers’ operations and reopening of clients as COVID-19 restrictions continue to be relaxed.”

At the same time, employment in the sector declined at one of the fastest rates in the past 11 years, with firms reporting reductions across the consumer, intermediate, and investment goods industries.

Small, medium, and large-sized firms all implemented hefty cuts to staffing numbers, IHS Markit said.

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Amidst the positivity, the poor employment situation is the “elephant in the room,” according to Duncan Brock, the group director of the Chartered Institute of Procurement and Supply.

“The drop in job numbers in August makes this feel more of a rebalancing strategy than real recovery,” he said.

“Companies are looking at how to stay in business for the rest of the year as challenges from the pandemic retreat a little only to be replaced by an imminent Brexit.”

Business sentiment, which hit a 28-month high in August, remained buoyant as firms indicated that they expected a further return to normal to precipitate growth in output.