UK factories saw their biggest contraction since the first COVID-19 lockdown in May 2020, while business optimism hit a two and a half year low, according to a report out Tuesday.
The latest S&P Global/CIPS manufacturing purchasing managers index came in at 46.2 in October, up from the initial estimate of 45.8, but well below the 48.4 recording in September. This marked a 29 month low.
Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing production suffered a further decline at the start of the fourth quarter, with the sector buffeted by weak demand, high inflation, supply-chain constraints and heightened political and economic uncertainties."
"On current form manufacturing is in no position to help prevent the broader UK economy from sliding into recession" he added.
Gabriella Dickens, senior UK economist, at Pantheon Macroeconomics agreed saying the data suggested “the manufacturing sector is teetering on the edge of a recession.”
She cautioned demand for industrial goods looks set to fall further as real incomes continue to be hit by above-target inflation, the watering down of government support for energy bills in April, austerity measures and higher unemployment.
The downturn in manufacturing output looks set to extend deep into 2023, she warned.
Maddie Walker, Industry X lead at Accenture UK, said: “British manufacturers have borne the brunt of market volatility. The prospect of a slowdown in demand has hurt new orders significantly which were helping to offset the pressures of rising import costs, shipping delays and soaring energy prices.”
David Atkinson, SME and mid corporates head of manufacturing at Lloyds Bank, said industry craves stability – but didn’t get it in October.
“Political and economic stability gives manufacturers the confidence to plan and invest, which drives positive consumer sentiment and sales. Manufacturers are hoping the next fiscal statement will provide the stability they need to help drive investment and long-term growth. But for now, they will continue to operate with caution," Atkinson concluded.