Brexit stockpiling pushes factory activity to three-year high

Will Green is news editor of Supply Management
4 January 2021

Input purchasing ahead of the end of the Brexit transition period pushed UK manufacturing activity to a three-year high in December, according to the latest PMI.

New orders rose at the quickest pace since August 2020, reflecting clients bringing forward orders to guard against potential disruption.

Inventories of purchases increased to the second-greatest extent in survey history, with only March 2019 seeing a stronger increase.

The steepest increase in activity was registered at intermediate goods producers, while consumer goods output returned to growth following a series of contractions.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index climbed to 57.5 in December, up on 55.6 in November and against the 50 no-change reading.

Manufacturers experienced substantial disruption to supply chains, with vendor performance deteriorating to the third-greatest extent in survey history. Raw material shortages, port delays, freight capacity issues and Brexit all contributed to disruption.

Average input costs rose at the fastest rate in two-and-a-half years, reflecting input shortages, vendor price rises, increased transport costs, Brexit uncertainty and exchange rate factors. In response manufacturers raised output charges.

Duncan Brock, group director at CIPS, said: “After a severely turbulent year, UK makers still have a great deal to worry about. Job numbers continue to fall, and material shortages have resulted in the highest cost inflation since 2018. The sector is holding its breath until the terms of the new deal are fully understood and whether new business can be sustained in the same way in a post-Brexit marketplace.”

Rob Dobson, director at IHS Markit, said: “UK manufacturers also built-up input stocks to one of the greatest extents in the 29-year survey history in expectation of heightened logistics issues continuing during the first part of 2021. If this is the case, as expected, the disruption to deliveries and production schedules, alongside the unwinding of Brexit inventories, may place the manufacturing recovery under greater threat in the coming months.”

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