LONDON: After one of the sharpest declines in activity since the 2008-09 recession last month, British manufacturers are starting 2023 with some hope as they reflect a sharp drop in new orders and ongoing job cuts.
The UK S&P Global/CIPS Manufacturing Purchasing Managers’ Index (PMI) fell to 45.3 in December from 46.5 in November. This is the lowest level since May 2009, apart from two months at the start of the COVID-19 outbreak in 2020.
Tuesday’s reading was stronger than the preliminary estimate of 44.7 published last month, but below the 47.8 reported in the equivalent eurozone survey on Monday.
In a statement, S&P Director Rob Dobson said: “Output has contracted at one of the fastest rates in the past 14 years as new order inflows have plummeted.”
“The drop in new business is worrisomely steep. This is due to weak domestic demand accompanied by a noticeable decrease in new foreign orders,” the director added.
The figure is in line with a gloomy trend last month by trade association Make UK, which forecast output in the sector to fall 3.2% in 2023. The latest official data shows factory output in October. 4.6% lower than the previous year
“These results are the latest weak indicators … indicating that GDP is likely to decline again in Q4 2022. Additionally, as household and business finances continue to squeeze, The situation is unlikely to improve in the near future,” said Martin Beck, chief economic adviser at EY ITEM Club.
Government budget forecasters forecast in November that the overall UK economy would contract 1.4% this year as businesses and households continue to struggle with high inflation.
According to a quarterly study by Deloitte, the chief financial officer of the British giant believes rising interest rates make it the worst time for businesses to borrow money. since the financial crisis 14 years ago
In monthly PMI surveys, manufacturers are increasingly optimistic about the coming year. Future output expectations hit a five-month high as supply chain issues eased and inflation pressures hit their lowest point since late 2020.
However, with orders falling from both local customers and those in China, the US, Europe and Ireland, manufacturers continued to cut jobs at their fastest pace since October 2020.
“The main driver of lost export contracts is weak global economic conditions. While Brexit-related issues, such as shipping delays and rising costs, were discussed. This has caused some EU customers to look elsewhere,” said S&P Global, who compiled the survey.
