manufacturing at the lowest level in 31 months

Weak exports, job losses and signs that trade with Britain is being “abandoned” even after Brexit mean the manufacturing industry ends 2022 with its lowest output in more than two years.

Manufacturers survey data compiled by S&P Global recorded a fifth straight month of contraction in the sector, with December the lowest activity in 31 months. The S&P/CIPS Purchasing Managers’ Index fell to 45.3 from 46.5 in November, down from 50 points indicating growth. The reading was better than the initial estimate of 44.7.

UK manufacturers, which account for around 10 per cent of the economy, have faced a slump in export demand, higher energy costs and trade disruption related to Brexit. The survey noted that customs delays were driving up costs and prompting some EU customers to source goods from outside the UK.

Rob Dobson, director of S&P Global Market Intelligence, said the problems facing British manufacturing were “exacerbated by the constraints of Brexit, as higher costs, administrative burdens and shipping delays encourage an increasing number of customers to do business with Britain.” is done”.

Survey data for December showed declines in all five sub-indices, such as output, new orders, jobs and stock levels, making it one of the worst months for factories since the financial crisis in 2009. The rate of job losses was the highest since October. Due to falling orders in 2020, companies laid off employees.

“Output contracted at one of the fastest rates during the past fourteen years, as new order flows weakened and supply chain issues continued to mount. The decline in new business was worryingly sharp, as new orders from overseas fell further, coupled with weak domestic demand.

The economy is expected to slide into recession from the third quarter of 2022 and is projected to see no growth till the end of this year. Growth is expected to be the slowest among G7 countries and remain below their pre-pandemic peak through 2024, according to a survey of economists by The Times.

Thomas Pugh, an economist at professional services firm RSM, expects the economy to shrink by 0.3 percent in the last three months of 2022, confirming the decline in a formal recession. “By October 2022, output in the manufacturing sector was about 1 percent below its pre-pandemic level and the sharp decline in the PMI in December suggests that output has declined even further over the past two months,” he said.

One of the few bright spots for manufacturers in December was a decline in energy and material price inflation on the back of improving global supply chains and easing demand for oil and gas. As per the survey, the average purchase price grew at the slowest rate since November 2020. A measure of expected future output rose to 66.3 last month, also indicating some relief for businesses.

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