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The downturn in the UK manufacturing sector sharpened in August, survey results from S&P Global showed on Monday, as the sector contracted for the eleventh month running.
The manufacturing purchasing managers’ index fell to 47.0 points in August from 48.0 in July, remaining below the 50-point neutral mark.
It also slightly underperformed the flash reading of 47.3 points.
Weak market conditions, tariff uncertainty and subdued client confidence contributed to a sharp drop in new order intake in August, as both domestic and overseas demand fell.
The downturn in production volumes extended for the tenth successive month but showed ‘comparative resilience’.
S&P Global said the rate of contraction was marginal and only ‘slightly steeper’ than the prior month.
Declines were recorded in the consumer and investment goods industries, while there was a marginal rise in output at intermediate goods producers for the second successive month.
The main factor contributing to weakness in the sector was a slump in new work intakes, which contracted at the fastest pace in four months.
S&P Global noted that UK manufacturers linked lower new work inflows to subdued client confidence, cost caution after increases to the UK statutory minimum wage and employer national insurance contributions, and tariff uncertainty.
New export business contracted for the 43rd month in a row.
Outlook for the sector was ‘relatively mixed’ in August, as business optimism rose to a six-month high but was below the long-run series average.
Job losses were recorded for the 10th successive month, due to ‘weaker intakes of new work, tariff uncertainties and rising labour costs’.
‘Production volumes are still showing resilience in the face of global geopolitical uncertainty and US tariff policies, with both July and August having seen only slight contractions that were milder than those suffered earlier in the year. Business confidence has also lifted to a six month high, reflecting hopes that the trading environment is starting to settle down,’ said Rob Dobson, director of S&P Global Market Intelligence.
‘However, August also saw a steep drop in UK manufacturers’ new orders, with total order books and overseas demand both falling at some of the fastest rates seen over the past two years. 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.’
Dobson said the outlook for the sector ‘clearly remains very uncertain’.
‘With manufacturers fearing that possible government policy decisions, including potential tax increases, could further hurt their competitiveness in domestic and export markets, the upcoming Budget will likely prove very important in guiding business confidence about the year ahead,’ Dobson added.
The PMI survey features a panel of 650 manufacturers in the UK. The responses were collected between August 12 and 26.
The service and composite PMI readings will be released on Wednesday, with the construction PMI reading to follow on Thursday.
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