Records show that British factory growth weakened over July, with a reduction in domestic activity despite rising export demand from overseas and the expectations of purchasing managers’ index of 54, following June’s reading of 54.3.
Experts have warned that the sector could need several months to recover from the poor performance in July. According to findings released by the HIS Markit and CIPS UK Survey, confidence from businesses continues to drop, marking a 21-month low. The reason? The mounting uncertainties brought on by Brexit.
The Guardian reported that “British manufacturing output [slipped] to ninth globally behind France”, with EEF “data [showing that the] sector [is] starved of investment and losing ground as Brexit uncertainty persists”.
The figures have highlighted a declining trend in the UK’s international standing since the Brexit referendum, with the sector lacking investment backing due to an uncertain future relationship with the EU, and therefore, losing its previous momentum.
Rising input costs have seen many manufacturers impart higher charges to their customers to protect profits, despite the fact it’s widely known it isn’t a long-term solution to the issue. Supply chains have also suffered over an extended period due to uncertain global trading situations, which has left many struggling to meet their contractual commitments.
The slow rate of factory growth was a major cause for concern before the latest PMI survey, a report that is closely monitored by the industry to provide a wider insight into the sector.
Interestingly, the PMI survey paints a different picture of business confidence than that of the IHS/CIPS survey. Duncan Johnston, industry leader at Deloitte noted that export demand has grown exponentially over the last six months and that “UK manufacturers remain positive about the outlook for their business and, as a result, employment in the sector increased in July, marking two years of continuous job creation.”
There’s no doubt that it’s been a difficult time for the sector, with many twists and turns, and contradicting reports. But it’s not just the UK that has suffered; slack trade has been seen across the entirety of Europe. This activity counteracts the events of last year, where demand boomed as a result of flourishing global trade, whilst the weakened pound value saw global buyers searching for a competitive deal here in the UK. November 2017 saw export rates grow at their fastest pace since August 2013.
The chief economist at the EEF, Lee Hopley states: “Activity can, at best, be described as steady across the UK and Europe going into the second half of the year” despite some findings suggesting otherwise.
Manufacturing companies need to take action now instead of waiting for all the events to unravel because this can bestow control and predictability, contrary to popular belief. Cost reduction methods in manufacturing operations will streamline the business, offsetting rising costs and any damage to profitability.
More often than not, companies can become fixated on the cost of manufacture whilst other, just as important, business costs are left for infrequent reviews. Our team of experienced consultants has in-depth knowledge of the manufacturing sector, trends, technologies and suppliers, as well as related industries, such as logistics, energy, paper, packaging and waste to bring you the best value. Get in touch with us today to find out more.