UK manufacturing sector flying high once more

Here’s why

The UK Manufacturing sector has picked up the pace once again, with the latest IHS Markit/CIPS UK manufacturing Purchasing Managers’ Index (PMI) showing the highest figure for four months of 56.9 for August. This represents significant growth from the July results of 55.3. This is not far behind the three-year highs recorded earlier in 2017.

Importantly, new orders are up, both domestically and internationally, as performance has improved across the board: in output, employment, stocks and supplier delivery times.

Production has grown the most in seven months, showing some of the best results for three years. There has also been cross-sector improvement, including consumer and investment sectors; manufacturers both large and small.

New export business is still strong, with export orders coming in from Europe, the USA, and Asia-Pacific, particularly from Australia and China. The continued weakness of the British Pound has provided a noticeable boost to exports and to the UK’s export attractiveness globally.

Stronger growth has also led to an improvement in jobs creation in the sector, growing the fastest for three years and now reporting growth for over a year.

Unsurprisingly, confidence in the UK’s manufacturing sector remains high, recorded as the highest since May 2017. More than half of the manufacturers surveyed expect increased business over the next 12 months, with fewer than seven percent anticipating a decrease in work.

However, purchase prices have increased again for the first time in seven months, largely down to increasing commodities costs, although not to the extent of the worrying highs seen earlier in the year. In turn, selling costs have gone up, but are increasing slowly.

Ricky Nelson, Head of Corporate Dealing at currency specialist, Halo Financial, commented, “It’s great to see the industry performing strongly in the face of continued political and economic uncertainty. Increasing domestic and overseas demand builds solid foundations for the challenges that lie ahead with Brexit and other key events worldwide, opening up strong trade and business opportunities.”

“With firm foundations and continued growth in the sector, manufacturers should assess their currency exposure now and in the future, particularly with suppliers and buyers in Europe, the US and countries linked to commodity currencies, such as Australia, New Zealand and Canada. Careful currency planning, hedging and risk management strategies will be key in the months to come.”

Atul Kariya, Manufacturing Sector Head and Partner at accountants and business advisors, MHA MacIntyre Hudson, added, “This is more positive news for the UK manufacturing sector – and for UK industry as a whole. It’s reassuring to see the UK’s sector showing such resilience. Businesses must now build on the progress being made in the current market and plan ahead to navigate increasing inflationary pressures and the various obstacles and opportunities presented by Brexit.

Neill Lloyd, Sales Director at manufacturing specialist law firm, FBC Manby Bowdler, said: “This month’s results show there can be no doubt that UK Manufacturing is in great shape. Output, new orders, employment and the other two key PMI components performed stronger during August, with the overall PMI of 56.9 the second highest level for three years.”

“Steep rises in production needed to meet the increased intake of work are also welcome, leading to increased employment opportunities. Pleasingly, the domestic market was the main source of new business; and increases in commodity prices continue to be partially accepted by customers. Ensuring contract terms allow for this is therefore more important than ever.”  

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