Manufacturing remains in the doldrums as demand still weak

The closely-watched Markit/CIPS purchasing managers’ index showed a second successive month of contraction in manufacturing as companies scaled back production in response to “lacklustre” demand from both domestic and overseas markets.

Rob Dobson, senior economist at Markit, said: “March PMI data indicate that the manufacturing sector contracted again during the opening quarter of 2013 (and will) remain a drag on the broader economy.

“These weak numbers may be sufficient to tip the balance and convince more members of the Monetary Policy Committee to consider additional quantitative easing at their meeting next week.

“The onus is now on the far larger service sector to prevent the UK from slipping into a triple-dip recession.”

The figures will pile more pressure on Chancellor George Osborne who has called for a “march of the makers” to help rebalance the UK economy.

Manufacturers appear to be losing patience with the Government, according to a major new poll out today for the Institution of Mechanical Engineers.

The survey of 1,000 manufacturers said the Government is failing to promote UK manufacturing and remains more committed to the financial sector than UK industry.

It revealed that 61 per cent of respondents believe the Government is performing badly on manufacturing policy, with just 17 per cent of those polled saying the Government is performing well.

In the strongest result of the survey, 73 per cent of manufacturers polled said that the Government is not doing enough with careers advice to promote science, engineering and manufacturing in schools.

Philippa Oldham, of the Institution of Mechanical Engineers, said: “The UK manufacturing sector should be at the very heart of a thriving economy, but there is little confidence among the respondents that the Government is doing enough to make this happen.

“Indeed, people overwhelmingly said the UK Government still remains far too committed to the financial sector, when it should be looking to the potential of manufacturing to spearhead economic recovery and lead the country towards growth.

“We have welcomed the interest shown in UK manufacturing by the main party leaders in recent months, but visits to factories and warm words of encouragement are not enough.

“Government must set out a clear, long-term industrial strategy with cross-party support. This strategy must look to address the engineering skills shortage and provide greater financial incentives similar to the research and development tax credits already implemented.” A spokesman for the Department for Business Innovation and Skills said: “Manufacturing makes a valuable contribution to the economy which is why it is a central pillar of our industrial strategy for growth.”

Yesterday’s figures from Markit/CIPS illustrate the challenges facing the sector. The PMI edged higher to 48.3 in March, an improvement on February’s reading of 47.9, but insufficient to raise the index back above the neutral mark of 50.

Andy Tuscher, Yorkshire director at the EEF manufacturers’ organisation, said: “There’s been very little in any of the survey data over the past couple of months that would indicate that manufacturing has staged a recovery in the first quarter of the year.

“The continued weakness in the PMI is disappointing overall, but of particular concern is another month of falling export demand.

“While manufacturers have made some good gains in non-EU markets over the past couple of years, the ongoing drag on orders from the eurozone is still significant and likely to impact on prospects over the coming mon- ths.”

Michael Hartig, head of manufacturing for Barclays in the North, said: “Although still in contraction, the rise in last month’s PMI matches what we are seeing in the market place.

“The manufacturers we speak with and most of the surveys conducted give a bullish outlook, particularly in the short term.”

Economists at Goldman Sachs said yesterday that sterling is now weak enough to rebalance the UK economy.

[email protected]