UK manufacturing growth cools in December - PMI survey shows

Manufacturing growth in the UK cooled in December after hitting four-year highs in the preceding month, according to a leading survey, but the sector remains a bright spot in Britain's economy heading into 2018.

UK manufacturing growth cooled in December after four year highs. Pic: Ian Nicholson/PA Wire

In contrast to accelerating growth in the eurozone, the IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) dropped to 56.3 from 58.2 in November.

The figure coming in at the bottom end of ecomists forecasts that had pointed to a reading of 58.

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However, business leaders have said the cool down in manufacturing was always on the cards following four year highs in November.

While growth in new business, output, export orders and employment slowed in December, the PMI stayed above its average for 2017 as a whole.

Natalie Sykes, regional director of IoD Yorkshire and North East, said: “After reaching a four-year high in November, a cool down in manufacturing growth last month was always likely.

“While a continued fall would be concerning, there are signs the sector will remain somewhat resilient in the near future.

“Indeed, the figures remain above the long-term average, while our weak currency coupled with rising global growth will continue to provide some buoyancy for factories.

“Of course, much will also depend on how progress on Brexit trade issues helps to assuage uncertainty for managers.”

British factories have been boosted by a resurgent European economy. Demand improved from clients in Europe, the USA, China and the Middle East. Last month, eurozone manufacturers enjoyed their strongest growth since PMI records began more than 20 years ago, easily outpacing their British peers.

Samuel Tombs, an economist with consultancy Pantheon Macroeconomics, said the gap between British and eurozone manufacturers in December was the widest since June 2008.

“We expect the recovery in the manufacturing sector to lose its current vitality soon,” he said, citing growing backlogs of work caused by recruitment problems and cuts to investment since the Brexit vote.

The PMI showed manufacturers added staff at the slowest pace in six months, adding to signs that job creation, a highlight of Britain’s economy in recent years, is now slowing.

Ms Sykes said that there was still a need to address skills shortages “by providing greater working and living conditions in addition to higher quality education that is not just for the privileged”.

She added: “This is not just the case for Yorkshire but for the whole of the Northern Powerhouse if we are to retain the best talent to fuel our manufacturing economy.”

Positive end to year for sector

UK manufacturing ended the year on a “positive footing”, according to Rob Dobson, director at IHS Markit, which compiles the PMI survey.

He added: “Although growth of output and new orders moderated during December, rates of expansion remained comfortably above long-term trend rates. The sector has therefore broadly maintained its solid boost to broader economic expansion in the fourth quarter.”