Factory input buying spikes as Brexit deadline nears

Will Green is news editor of Supply Management
posted by Will Green
1 December 2020

Input buying volumes in the manufacturing sector have reached their highest levels since March 2019 in the run-up to the end of the Brexit transition period, according to the latest PMI.

November saw rising levels of input purchasing and stockpiling, while export business rose as EU-based clients brought forward orders ahead of the 31 December deadline.

The IHS Markit/CIPS Manufacturing Purchasing Managers’ Index rose to a 35-month high of 55.6 in November, up on 53.7 in October and against the neutral 50 reading.

Increased production was linked to companies reopening after Covid closures earlier in the year but there was a marked divergence between sub-sectors, with intermediate and investment goods showing robust growth but consumer goods experiencing a continuing downturn.

Higher levels of buying increased pressure on already-strained supply chains, leading to raw material shortages and a deterioration in vendor performance. Longer lead times were also linked to the pandemic, restrictions including renewed lockdowns, transport disruptions and shipping delays.

Input cost inflation accelerated to a two-year high, with companies responding by raising average selling prices to the greatest extent in the year so far.

Job losses were recorded for the 10th consecutive month, linked to redundancies, cost reduction initiatives, staff restructuring and natural wastage.

Rob Dobson, director at IHS Markit, said: “Growth of the UK manufacturing sector picked up in November, temporarily boosted by Brexit buying among clients and the ongoing boost from economies reopening following lockdowns earlier in the year.

“The effects were strongest felt among firms supplying inputs to other companies as warehouses were restocked, and among producers of investment goods such as machinery and equipment. The weak point was the consumer goods industry, which saw lower output and new order intakes amid depressed household sentiment caused by mounting job losses and the UK re-entering lockdown.”

Duncan Brock, group director at CIPS, said: “Panic buying aside, there was little in the figures to suggest a sustainable recovery once we move into 2021. Job shedding continued last month and new business could drop off a cliff in January as potential border disruptions are thrown into the mix.

“The prospect of an extended recession continues to hover above the UK economy until clarity around a Brexit deal is reached and hopes for an effective vaccine supply chain are realised, bringing much-needed normality.”

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