https://uk.sganalytics.com/blog/manufacturing-in-uk-shrinks-fastest-rate-since-2020-lockdown/
Manufacturing in the UK shrinks at the fastest rate since the 2020 lockdown
SGAnalytics_Blog_Manufacturing in the UK shrinks at the fastest rate
since the 2020 lockdown
Published on Nov 15, 2022
The UK economy in 2023 is about to fall into a black hole because of its
own government. The UK Economy in 2023 has been facing a lot of crises
for a long time now.
The manufacturing industry lost 9.2 (E&T) percent of its revenue in
2022, dropping from £636 billion to £577 billion, and it employed 1.7%
less people than in 2021. Recently In October, factory activity in both
the United States and the United Kingdom fell at their fastest rates
since the middle of 2020. Business surveys released on Tuesday revealed
a drop in global factory output in October due to prolonged supply
interruptions and dimming recovery hopes caused by widespread recession
fears, high inflation, and China's zero-COVID policy. Russia's invasion
of Ukraine has caused inflation to skyrocket worldwide as supply
networks already recovering from the coronavirus outbreak were hammered
anew.
In the United Kingdom's industrial sector, the decline continued last
month, with new orders falling at the quickest rate seen since May 2020.
According to the manufacturing buyers' index (PMI) compiled by S&P
Global, a significant decrease in the amount of new work received,
sluggish demand for exports, and disruptions in the supply chain all
contributed to a reduction in production as well as employment.
SGAnalytics_Blog_2022 Lockdown
Despite the fact that this number was higher than the earlier flash
estimate of 44.8, the PMI has now fallen below the neutral line of 50
for three consecutive months. The indicator reached its lowest point in
29 (Reuters) months in October, coming in at 46.2, down from 48.4 the
previous month. A decrease in activity is indicated by any reading that
is less than 50.
The lackluster performance of sales to international customers during
the period was reflected in the decline in the new export business for
the ninth consecutive month. This was owing to the global economic
situation being worse, Chinese demand getting weaker, the war in
Ukraine, and continued concerns related to Brexit restricting export
performance.
The production of consumer, intermediate, and investment goods all went
down, with output falling the most in the intermediate goods sector.
Investment goods also performed particularly poorly. The decrease in the
number of new orders received did, however, result in an increase in the
quantity of finished goods in stock. S&P said that there was a rise in
inventories for the sixth month in a row, albeit at the slowest pace
seen since June.
The data also revealed that job losses had been reported for the first
time since 2020. These job losses "reflected redundancies, cost
management initiatives and problems in both attracting and keeping
workers and certain skill sets," according to the data.
SGAnalytics_Blog_UK manufacturing
The overall worsening scenario has brought down corporate optimism to a
level not seen in over 2.5 (LondonLovesBusiness) years. Confidence has
been harmed as a result of weak demand, worries about recession,
inflationary pressures, and rising levels of uncertainty.
"No wonder the UK's manufacturers were down in the dumps with the lowest
optimism for the year ahead in two and a half years as the burden of
potential rail strikes affecting freight added to their downbeat
assessment," said John Glen, chief economist at the Chartered Institute
of Procurement & Supply.
"Manufacturing may not be the largest sector of the United Kingdom's
economy, but its importance is evident as supply disruptions continue
elsewhere and additional capacity is needed domestically to keep the
wheels running for customers and consumers alike."
The respondents to the study predicted that output levels would be
greater in one year, with approximately 43% of them making this
prediction. This prediction was reinforced by the introduction of new
products and the potential reduction in economic and political volatility.
SGAnalytics_Blog_Economy
At the beginning of the fourth quarter, price inflation remained strong
despite the fact that both input prices and output charges were rising
at rates that were above the survey average. Nevertheless, the rates of
increase in both price measures slowed down a little bit in the month of
October.
Companies have stated that prices have increased for a diverse range of
products. In addition to chemicals, electronics, energy, food, metals,
packaging, paper, and lumber, there were other items as well. Also
included were things like paper and packaging. The prices of
transportation and administration both went up as well.
There was a discussion of how the conflict in Ukraine, general
inflationary pressures, and the value of the pound in relation to other
currencies all contribute to pricing increases.
"There is evidence that the UK manufacturing sector is starting to
contract," said Simon Jonsson, UK head of industrial products at KPMG.
"As consumer and business demand dips, whilst the impact of inflation is
being felt on operational costs," he added.
SGAnalytics_Blog_Manufacturing in the UK
"The instability of the pound, a decreasing order pipeline, and
expectations surrounding interest rates all create a gloomy picture for
the manufacturing sector," said one analyst. "The manufacturing industry
is facing a number of challenges." The problem is made even worse by the
fact that a large number of businesses are still dealing with a lack of
supplies.
"Parts of the industrial sector are putting a hold on post-pandemic
capacity growth since there is not a solid pipeline of new work, and
even worse, some firms are making redundancies in order to save money on
operational expenses. Since late 2020, this is the first month in which
there has been a loss of manufacturing jobs.
"The United Kingdom is home to a robust manufacturing sector, and
industry leaders are looking forward with great anticipation to the
government's autumn statement on November 17 in the hopes that the
government will outline its plan to keep the economy in the United
Kingdom competitive."
SGAnalytics_Blog_United Kingdom
Global inflation has risen as supply chains still recovering from the
coronavirus pandemic have been impacted by Russia's invasion of Ukraine,
prompting consumers to cut back on purchases. Companies reported a wide
range of things increasing in price. Products, including chemicals,
electronics, energy, food, metals, packaging, paper, and wood, were
among them. Expenses in areas such as transportation and management have
also increased. It was discussed how the conflict in Ukraine, inflation
in general, and the value of the pound all played a role in the price
increases. The UK manufacturing sector shrank further last month, with
new orders contracting at the highest rate since May 2020.
Also Read - UK is the only G7 country with a smaller economy than before
Covid-19.
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