Britain’s manufacturers slumped to their worst condition since the grim days of 2012 last month as political uncertainty over Brexit and fears of a global economic slowdown stifled demand for their goods.
The influential Chartered Institute of Procurement and Supply survey sparked renewed fears of recession as it showed new exports plunging and business conditions deteriorating at their greatest pace for seven years.
Factory owners reported some EU-based clients were routing supply chains away from the UK due to Brexit. Orders from the US and Asia also weakened, with business optimism falling to its lowest point since being tracked seven years ago.
The unexpectedly grim picture hit the pound hard and highlighted ever more clearly the impact that Westminster’s increasingly fractious and unpredictable environment was having on the real economy.
Faced by such uncertainty, employers imposed hiring freezes and redundancy programmes, with overall employment in the sector falling at one of the fastest rates in six-and-a-half years.
Rob Dobson, director at survey compiler IHS Markit, warned that the survey indicated a 2% quarterly pace of contraction in the sector.
The overall index, in which anything below 50 means contraction, fell from July’s 48.0 to 47.4.
“Companies scaled back production in response to the steepest drop in new order intakes since mid-2012. The further downturn in export orders occurred despite a weakening in the sterling exchange rate.
“The current high degree of market uncertainty, both at home and abroad, and currency volatility will need to reduce significantly if UK manufacturing is to make any further strides towards recovery in the coming months.”
The pound plunged nearly a cent against the dollar, down 0.71 cents at $1.2085 and losing half a cent against the euro, furthering the falls that greeted last week’s push by Prime Minister Boris Johnson to prorogue parliament.
Seamus Nevin, chief economist at Make UK, the renamed Engineering Employers Federation, said: “The unprecedented economic and political uncertainty in the UK, as fears of a crash-out Brexit grow, is continuing to seriously undermine the performance of UK manufacturing.
“Business confidence has now fallen to an all-time low.”
