UK Factory Output Slumps as Domestic and Export Orders Decline.

03 Jan, 2024

Britain's manufacturing sector faced a challenging start to the year, breaking a streak of 17 consecutive months of contraction. December witnessed a sharper decline in factory output than anticipated, attributed to reduced orders from both domestic and export clients.

S&P Global and the Chartered Institute of Procurement and Supply reported these findings in a survey involving approximately 650 manufacturers—a crucial indicator monitored by the Bank of England for early economic warnings.

Company executives cited factors such as a deteriorating economic landscape, delayed client orders, and adverse weather conditions contributing to the downturn. The S&P Global/Cips manufacturing purchasing managers index (PMI) registered a decline to 46.2 in December, halting three months of improvement. This figure was down from November's seven-month high of 47.2, marking the 17th consecutive month below the critical 50 mark that separates growth from contraction.

Manufacturers grappled with increased borrowing costs, resulting from 14 consecutive base rate hikes by the Bank of England since December 2021. The sector also faced diminished demand for goods amidst a global trade slowdown and households dealing with the challenges of a cost of living crisis. S&P Global Market Intelligence's Director, Rob Dobson, noted persistently "frosty" demand, leading to a decline in manufacturers' confidence, reaching its lowest level in a year. This environment prompted renewed cost caution, with further cuts to stock levels, purchasing, and employment.

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