UK manufacturing downturn worsens amid slump in new orders

The downturn in UK factory production worsened last month due to a fall in new orders and export business due to trade tensions, according to new figures.

The S&P Global UK manufacturing PMI survey, watched closely by economists, showed a reading of 47.0 in August, slowing from 48.0 in July.

Any reading above 50 indicates that activity is growing while any score below means it is contracting.

It was marginally worse than expected, with economists having predicted a reading of 47.3.

Setback

The figures were the worst for three months and represented a setback for the sector after signs of recovering activity earlier in the summer.

Rob Dobson, director at S&P Global Market Intelligence, said firms witnessed a “steep drop” in new orders over August.

He said: “Weak market conditions, US tariffs and downbeat client confidence all contributed to the dearth of new contract wins.

“Job cuts were also reported for a tenth successive month, with factory headcounts dropping to one of the greatest extents post-pandemic.”

The research showed new orders contracted “at the fastest pace in four months”, with manufacturers linking the decline to subdued client confidence and caution regarding costs following recent minimum wage and national insurance contribution increases.

Export

New export business also decreased for the 43rd consecutive month as concerns over tariffs and wider trade tension impacted demand.

Nevertheless, surveyed companies indicated that business optimism was at its strongest level for six months, with firms predicting stronger production over the coming year.

Firms indicated that uncertainty led to further cutbacks in employment last month, with a reduction in jobs for the tenth month in a row.

Mike Thornton, head of industrials at RSM UK, said: “The latest fall in the manufacturing PMI reversed a three-month upward trend with a sharp fall in new orders dragging down the headline figure.

“We tend to see a slight drop-off in new orders seasonally as the summer holidays hit, but the fall this year was sharper than previous years.

“Hopefully it’s a seasonal blip and we will see further signs of a recovery later in the year.”