Coronavirus: record declines in output

23 April 2020

Widespread business shutdowns due to the coronavirus pandemic have caused record declines in UK manufacturing and services sector outputs, according to the latest PMI.

The IHS Markit/CIPS Flash UK Composite PMI dived to 12.9 in April, down from 36 in March. The results are based on around 85% of usual monthly replies to the survey.

The monthly decline in manufacturing and services activity exceeded the downturn seen at the height of the global financial crisis by a wide margin, and is the fastest decline in business activity since comparable figures were first compiled over two decades ago.

Around 81% of UK service providers and 75% of manufacturing companies reported a fall in business activity during April, which was overwhelming attributed to the Covid-19 pandemic.

The small minority of manufacturers reporting output growth were mostly involved in medical supply chains or producers of food and drink.

Goods producers overwhelmingly linked lower output to plant shutdowns or reduced production capacity, as well as cancelled orders across manufacturing supply chains.

In manufacturing, the sharpest drop in output was registered in the textiles and clothing sector, largely reflecting collapsed demand from the retail sector, though the transport sector, including car production, also reported an especially steep decline.

Hotels, restaurants and other consumer-facing businesses in the services sector reported the steepest drop in output, with many firms reporting a total halt in activity. Even in financial services, which had the least marked downturn, the scale of the decline was unprecedented.

There was a small degree of positivity in sentiment about the year ahead for business activity, and in the services economy there were sporadic reports of growth in April among those with major clients in online retail or the public sector. But overall optimism remained much weaker than at the start of 2020, the survey found.

Duncan Brock, group director at CIPS, said the UK private sector had plunged into “the twilight zone” in April. 

“Though this significant and further deterioration from last month’s results came as no great surprise, it is no less devastating,” he said. 

“Manufacturing output sometimes shrank into almost nothing as the pandemic’s grip took hold and factory closedowns at home and abroad made regular production schedules impossible. Supplier delivery times lengthened to an unprecedented extent. 

“Some manufacturers commented on switching plant capacity to assist healthcare supply chains. Meanwhile, service providers ramped up their online operations to survive, but others just hit a dead stop, shedding jobs and facing extreme cash flow difficulties. 

“There’s nothing to applaud in this month’s results. Even the slight rise in optimism from last month’s record low feels like a blip to what the economy is facing in 2020. The figures for April could not be more worrying but as we may not have reached pandemic peak yet, there’s much more bad news to come.”

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