Unexpected surge takes UK manufacturing to three-year high

The Markit/CIPS purchasing managers’ index (PMI) for the sector showed a reading of 57.3 last month, up from 54.2 in March and well above economists’ expectations in an index where any reading above 50 indicates growth.Domestic orders were the highest since January 2014, while the relative weakness of sterling and the improving outlook of the global economy helped boost export orders.Rob Dobson, senior economist at IHS Markit, said, “Growth of output, new orders and employment all gathered pace, driven higher by the continued strength of the domestic market.“There was also a solid bounce in new export business, as the weak sterling exchange rate helped manufacturers take full advantage of the recent signs of revival in the global economy, and especially the eurozone, which is enjoying its best growth spell for six years.“Although price pressures remain elevated, input cost inflation has eased significantly since hitting a record high in January. The big question is whether this growth spurt can be maintained, especially given the backdrop of ongoing market volatility and a number of political headwinds, such as elections at home and abroad.“Other surges seen since the middle of last year have generally proved short-lived, as weak wage growth sapped consumer spending.”

Manufacturing in “rude health”

Lee Hopley, chief economist at the manufacturers’ organisation EEF, described the latest PMI reading as proving UK manufacturing was in “rude health”.“Following the strong first quarter for manufacturing, today’s PMI confirms that lift off continued at the start of the second, with the surge in the pace of expansion partly thanks to the resilience of the UK order pipeline and the fact the global economy is investing again,” she said.“Against all expectations nine months ago, UK manufacturing appears to be in rude health, having navigated significant exchange rate swings and rising input costs, companies are capitalising on the upswing in the world economy and pressing ahead with some new investments.“While all the indicators are pointing to the potential of another year of decent growth for manufacturing, the importance of a comprehensive and enduring industrial strategy for the UK must not get lost in the noise of election campaigning.”

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Positive levels of new investment

Mike Rigby, head of manufacturing at Barclays, added, “The UK economy as a whole may have made a sluggish start to the year but, following a solid first quarter, manufacturing continues to grow with healthy order books and encouraging levels of new investment and employment.“Despite some easing, inflationary pressures will continue to take their toll on factory gate prices and ultimately manufacturers’ margins; however, the weakness in sterling and an improving global outlook continue to provide export opportunities for the sector.“What we don’t want to see now is the prospect of fractious Brexit negotiations fostering a more cautious and uncertain approach to investment from the sector.”Publication of the PMI coincided with an announcement from steel manufacturers Liberty House that it is to create 300 jobs and make multimillion-pound investments to secure the future of five UK plants and two distribution centres in China.Liberty, which has now formally completed a £100 million buyout of the speciality steels division of Tata Steel UK, said it will invest up to £20 million in new plant and equipment to boost competitiveness and secure international market leadership for a business that produces a range of high-value steels used in the manufacture of vehicles, aircraft, industrial machinery and equipment for the oil and gas industry.Get access to our free Global Mobility Toolkit

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