UK Manufacturing PMI remains stuck at six and-a-half year low in July

CIPS 1 August 2019

July saw little change in the level of input stocks. While some firms were still running down holdings bolstered prior to the original Brexit date, others were re-starting these stockpiling efforts in preparation for the new October deadline.


- UK Manufacturing PMI at 48.0 in July (unchanged)

- Output, new orders and employment fall again

- Businesses forecast output to be higher in one year's time

The downturn in the UK manufacturing sector continued at the start of the third quarter. Production and new orders shrank as manufacturers faced the ongoing headwinds of political uncertainty, a global economic slowdown and the unwinding of stocks built prior to the original Brexit date.

At 48.0 in July, unchanged from June, the headline seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) stayed below the neutral 50.0 mark for the third straight month. The last time that the PMI was below its current level was almost six-and-a-half years ago (February 2013).

Manufacturing production fell to the greatest extent in seven years, as companies scaled back output in response to a further solid decrease in new order intakes. Demand was weaker from domestic and overseas markets. The decline in new export business mainly reflected lower intakes from the EU and China.

Manufacturers linked lower order intakes and production to ongoing uncertainties (political, global trade tensions and Brexit) and slower world economic growth. Companies also noted that some clients were routing supply chains away from the UK in advance of Brexit.

The downturn in the sector negatively impacted the trend in staff hirings during July. Employment decreased for the fourth month in a row, with the pace of decline accelerating to one of the highest over the past six-and-a-half years. There were also reports of natural wastage, recruitment freezes and cost-control initiatives contributing to job cuts.

July saw little change in the level of input stocks. While some firms were still running down holdings bolstered prior to the original Brexit date, others were re-starting these stockpiling efforts in preparation for the new October deadline. Purchasing activity was cut for a third consecutive month. Lost contracts, efforts to free up cash and improved stock management processes were mentioned as reasons for lower input buying volumes.

Stocks of finished goods continued to rise in July, albeit to a noticeably lesser extent than earlier in the year. Firms linked higher inventories to Brexit preparations. There were also reports of clients requesting delayed delivery dates, in part due to their own high inventory levels, leading some manufacturers to hold on to stock for longer than planned.

Price pressures eased at UK manufacturers, with rates of increase in both input costs and selling prices the weakest for over three years. Suppliers' delivery times lengthened for the first time in three months.

Manufacturers maintained a positive outlook in July. Over 46% expect output to be higher in one year's time, compared to less than 10% forecasting contraction. Optimism was linked to new product launches, an expected rebound in export sales, strong order pipelines, reduced uncertainty following Brexit and improved infrastructure (including 5G networks).

Rob Dobson, Director at IHS Markit, which compiles the survey: “July saw the UK manufacturing sector suffocating under the choke-hold of slower global economic growth, political uncertainty and the unwinding of earlier Brexit stockpiling activity. Production volumes fell at the fastest pace in seven years as clients delayed, cancelled or re-routed orders away from the UK, leading to a further decline in new work intakes from both domestic and overseas markets.

“The weak, highly competitive environment makes a sustained revival highly unlikely in the coming months. However, a short-lived bounce leading up to October should not be ruled out, as some manufacturers are already gearing up to re-start Brexit preparations. If so, expect a case of déjà-vu during quarter four, as another correction in inventory holdings hits growth in the lead-up to year-end. On a more positive note, there may still be brighter times over the horizon. Over two-fifths of companies expect to see higher output a year from now, assuming political uncertainties and global trade tensions ease as expected.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply: “A killer combination of economic uncertainty and the weakest production levels for seven years, battered the manufacturing sector into contraction for the third consecutive month in July. New orders fell as businesses used up stockpiled materials, EU businesses moved supply chains out of the UK and weakness in the global economy stifled demand from both domestic and export markets.

“Unsurprisingly the decline in employment levels followed suit with one of the sharpest cuts to jobs for more than six years as businesses hesitated to keep calm and carry on and build staff levels.

“However, optimism for the future stayed relatively buoyant in the hope that certainty will once again return to UK shores soon and in spite of the increase in no-deal Brexit rhetoric. The softening in cost inflation to a three-year low was a small gift as some businesses planned to tie up more funds in goods, materials and premium warehousing space in a potential second round of stockpiling in readiness for October.”


Trudy Salandiak

Corporate Communications

T: +44-1780-761576

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