Manufacturers stockpile ahead of Brexit

Will Green is news editor of Supply Management
2 January 2019

A push by UK manufacturers to stockpile goods ahead of Brexit saw growth in the sector hit a six-month high in December, according to the latest PMI.

Input inventories rose at the fourth-fastest pace in the PMI survey’s 27-year history as firms built up stocks to mitigate potential disruption.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index rose to 54.2 in December, up on 53.6 in November and against the no-change reading of 50.

Rob Dobson, director at IHS Markit, said: “Stocks of purchases and finished goods both rose at near survey-record rates, while stockpiling by customers at home and abroad took new orders growth to a 10-month high.

“Any positive impact on the PMI is likely to be short-lived, however, as any gains in the near-term are reversed later in 2019 when safety stocks are eroded or become obsolete.”

Inflows of new work strengthened with improved demand from the US, Europe, China, India, Brazil and Africa. There were also reports that new product launches and promotional activity had contributed to sales growth, while exports were supported by the ongoing weakness of sterling.

Input cost inflation eased to a two-and-half year low in December, with price increases linked to the sterling exchange rate, Brexit uncertainty and higher general commodity prices. Output charge inflation increased to a three-month high.

The average PMI reading during quarter four of 2018 was the weakest since quarter three of 2016, when the Brexit referendum took place, while 2018’s average (53.9) was down on 2017’s (55.9).

Duncan Brock, group director at CIPS, said: “In an edgy mood, not even the sharpest rise in new orders since February 2018 was enough to significantly improve the sector’s optimism rising just above November’s 27-month low.

“Businesses remained concerned about the impact of the weak pound, and supplier performance which remained weak. To beat rising costs, disruptions in supply and continuing raw material shortages, purchasers took to forward buying to safeguard the delivery of customer orders.”

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