EU Referendum Contributed to A ‘Subdued’ May for UK Manufacturing

Posted on 6 June, 2016 by Chris Grigorovsky

The latest PMI survey from Markit has revealed that manufacturing in the UK stayed at an underwhelming rate in May, only increasing slightly above the neutral mark at 50.1.

Manufacturing Machine

Production volumes during this period remained fairly unchanged on the previous survey and despite an increase in new business, the level of new export business fell for the fifth year running.

The weakness in new order inflows reported, were linked by manufacturers to softer global economic growth, challenging exchange rates as well as the ongoing client and market uncertainties.

It has been found that over a third of respondents have attributed their business performance on the pending EU Referendum, with 8% saying that the impact was “strongly detrimental.”

Elsewhere in May, the intermediate goods sector saw a further growth of production and new business, alongside a return to expansion in both variables at consumer goods producers. While the investment goods industry “remained in the doldrums”, downturns in out and new orders are continuing.

Manufacturing job losses were again registered for the fifth straight month in May, however, the rate of reduction has eased to a three-month low.

Senior Economist at Markit, Rob Dobson, commented: “Although key indicators for output, new orders and the headline PMI ticked higher in May, the latest survey is still consistent with around a 0.8% quarterly decline in the office ONS Manufacturing Production Index. The sector will therefore remain a drag on broader economic growth, adding pressure on the service sector to sustain the upturn in GDP.”

He goes on to say that despite the domestic market remaining positive for manufacturers, “there are also signs that increased client uncertainty resulting from slower growth and the forthcoming EU referendum is weighing on investment spending. Manufacturers will have to wait and see whether this trend improves in the coming months.”

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