Britain’s manufacturers suffer record drop in output

The coronavirus pandemic has caused ‘substantial’ chaos and disruption across Britain’s manufacturing sector, new findings warn.

As the economic toll of lockdown starts to rear its ugly head, employment, new orders and output in the sector fell at the fastest pace for 28 years last month.

The closely-watched IHS Markit/CIPS purchasing managers’ index fell to a record low of 32.6 in April, down from 47.8 in March, with a reading of 50 or above indicating growth.

April’s manufacturing PMI reading of 32.6 is even worse than the previous record low of 34.5 recorded during the heat of the global financial crisis in 2009. 

Prime Minister Boris Johnson is under pressure to get the economy moving again and last night confirmed that he will outline more detailed plans for lifting lockdown restrictions next week.

While the service sector, encompassing hotels and restaurants, has potentially been hit the hardest during the crisis, many factories and warehouses making products for use here in Britain and overseas have been forced to shut to comply with lockdown restrictions.

Separate findings from trade body Made UK today reveal that 80 per cent of manufacturers reported a collapse in orders due to the pandemic last month.    

Manufacturing production, new orders and employment all fell and those businesses still placing orders have lengthened lead times dramatically, with most factories staying shut for the entire month, IHS Markit said.

IHS Markit branded the data ‘ruinous for Britain’s manufacturers as they continue to feel the full force of the coronavirus lockdown. Factory and office closures, stalling domestic and international demand and widespread furloughing are all taking their toll on the sector. 

Rob Dobson, a director at IHS Markit, said: ‘UK manufacturing suffered its worst month in recent history in April, as output, orders books and employment all fell at rates far surpassing anything seen in the PMI survey’s 28-year history. 

‘Huge swathes of industry were hit hard by company closures, weak global demand, lockdowns and social distancing measures in response to Covid-19. The only pockets of growth were seen at firms making medical and food products.’ 

Exports were also at record lows, with the Covid-19 pandemic also hitting overseas markets, the survey said.

Speaking to managers between 7 April and 27 April, the compilers also found that orders fell across the consumer, intermediate and investment goods sub-industries categories. 

What is particularly concerning is that, for one expert, the figures from IHS Markit seem to understate the true dismal impact of lockdown on the manufacturing sector.

Howard Archer, chief economist at the EY Item Club, said: ‘It should be noted that the April headline PMI understated the weakness of the manufacturing sector. 

‘This is because there was once again a marked positive contribution to the PMI from a record lengthening of supplier delivery times. 

‘This is normally seen as reflecting strong demand and a positive – but it has recently been due to the disruption to supply chains stemming from the disruption to manufacturing inputs because of factory shutdowns around the world and shipping delays due to coronavirus.’

Meanwhile, Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: ‘There is no comparable time in history to make predictions against, but, as production ramps up again in the Far East, the sector remained optimistic that, in a year’s time, the operating environment will resemble some new normality.’

The pounds’s reaction to the figures was fairly muted. Speaking to This is Money, David Madden, an analyst at CMC Markets, said: ‘Sterling had a muted reaction to the final reading of the UK manufacturing PMI report for April – 32.6 – it was fractionally below the flash reading, 32.9. 

‘The pound was already in the red before the news, but the update didn’t help matters. In this climate, what’s likely to move the pound is confirmation the UK is looking to ease lockdown restrictions.’ 

The pound is now around the $1.26 mark against the US dollar and at €1.14 against the euro. The FTSE 100 has had a poor couple of days, and is currently down 1.9 per cent or 112.08 points to 5,789.13.