September slowdown for UK manufacturers

This is the conclusion of the latest IHS Markit/CIPS UK Manufacturing Purchasing Managers' Index (PMI), which registered 57.1 compared to 60.3 in August. A score of 50 and above indicates an expansion of the manufacturing sector compared to the previous month.

Manufacturing production increased for the 16^th consecutive month in September, but the rate of expansion eased for the fourth month in a row. Growth was found to be slowed across the consumer, intermediate and investment goods sectors. Gains at medium and large-scale producers were offset by an ongoing downturn among small firms.

Production schedules were disrupted by input shortages, longer supplier lead times and capacity constraints. Average vendor lead times increased amid reports of delays to air, land and sea freight, staff shortages at vendors, COVID-19 and Brexit disruptions, a lack of delivery drivers and port delays.

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Weaker growth of new business also hindered efforts to increase output further during September. New orders rose at the weakest pace since February, as intakes from domestic clients increased at a slower pace and new export work contracted for the first time in eight months.

UK manufacturers continued to report labour shortages and difficulties recruiting appropriately skilled staff during September. Jobs grew for the ninth consecutive month, but the rate of increase was the weakest since January. Jobs growth slowed at medium and large sized companies, while small manufacturers saw cuts for the first time in eight months. Where higher employment was recorded, this was generally to meet production requirements, combat rising backlogs of work and preparations for future growth.

Manufacturers have, however, maintained a positive outlook for the year ahead in September; over 62 per cent of companies forecast their output would increase during the coming 12 months, compared to six per cent expecting a contraction.

Commenting on the results, Maddie Walker, Accenture’s Industry X lead in the UK, said, “While UK manufacturing output has slowed for the fourth consecutive month, it’s not yet triggering alarm bells with manufacturers showing healthy optimism to meet orders. We expect a slowdown to continue as manufacturers see no respite from supply chain gridlocks, restricted port capacity and workforce shortages.

“British businesses are improving their resilience by investing in areas such as automation and 5G connectivity, to streamline production processes and better connect their supply chains. Investment in new software and machinery, particularly with the UK’s roadmap in electric vehicle production, will likely kickstart greater demand for technology skills. A shift to software-based engineering will require manufacturers to develop and upskill their people or risk a severe skills shortage in the future.”