Collapse in UK manufacturing, despite price falls

1 December 2008
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01 December 2008 | Paul Snell

Activity in the manufacturing sector fell to another record low last month, although prices for materials fell for the first time since July 2005.

According to the latest CIPS/Markit Purchasing Managers' Index, where a figure below 50 represents contraction, activity in the UK's manufacturing sector fell to 34.4 in November - the lowest reading since the survey began at the start of 1992. The industry recorded a figure of 40.7 in October.

The number of new orders taken by manufacturers was one of the causes, dropping to 29.7 in November, the fastest fall in the survey's history. It compares to 37.8 in October. The fall was blamed on the ongoing downturn, credit restrictions, and problems in the automotive, construction, consumer and financial sectors.

There was also little sign that the weaker pound was encouraging buyers from overseas to look to the UK market, as new export orders recorded a figure of 37.1, down on the previous month's figure of 43.5.

Staff levels also shrank to a record low of 35.7, and the figure has now been below the 50-mark since April. Manufacturers' organisation the EEF called for "positive help" from the government and Bank of England, including interest rate cuts and tax incentives, or next year would be "very bleak" for the sector.

Input prices fell for the first time in more than three years, reaching 44.2 last month, compared to October's figure of 55.6. It represents a dramatic change in the cost of raw materials for buyers, which had equalled a record high of 80.3 in June this year.

SMdec2008

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