Manufacturing currently accounts for 10% of the UK GDP. Yet, a new survey has highlighted reductions in national manufacturing activity in the first quarter of 2018.
The Purchasing Index saw an average reading for the first quarter that was the lowest it had been in over a year. Readings came in at 55.0 in February and 55.1 in March, yet these figures surpassed the forecasted 54.7 by economists (readings over the 50-mark show growth). But these weak increases were not enough to lift the first-quarter figures.
Rob Dobson of IHS Markit stated: “The latest PMI survey provided further evidence that UK manufacturing has entered a softer growth phase so far this year.”
Last years figures reflected more positive results for the sector, with November 2017 seeing the PMI reaching a four-year high of 58.3. The ONS (Office for National Statistics) estimates the sector saw an expansion rate of 1.3% for the final quarter of 2017- accuring to 2.5% for the year as a whole. Success in manufacturing exports last year can be accredited to a weak pound and the subsequent global demand.
Surprisingly, the output expansion was higher in March despite the heavy snowfall experienced across most of the country, yet slower rises in orders (a nine-month low, in fact) and employment rates saw this achievement offset. The positivity from last year has somewhat dwindled from experts as the strength of the sector looks relatively unstable. On the other hand, manufacturers are upbeat about the future of the sector, with 55% of companies forecasting higher output in a year’s time.
“On the basis of past form, the [PMI] output index… points to a slowdown in manufacturing growth to around 0.5 percent in Q1, well below the 1 percent plus rates seen at the end of last year,” according to Ruth Gregory of Capital Economics.
High costs for the sector come from raw material shortages, disruptions in the supply chain and increases in commodity prices.
Duncan Brock of Chartered Institute of Procurement & Supply (CIPS) said:
“Without a significant rise in new orders, and if supply chains are still disrupted by shortages or the weather, for the next few months, it’s anticipated that there will be a continued muted pace of growth.
A rather apathetic prediction, but while optimism remains high and the sector continues its efforts to increase marketing activity and launch new products, everything could change.”
Add to the mix, an era of political change and multifaceted regulations to adhere to, its safe to say that remaining profitable is a top concern for manufacturing companies. For advice on your manufacturing procurement, get in touch with our specialists today.
Article by: Nick Clement