LONDON: Britain’s manufacturers shed jobs and cut prices last month as they struggled with tough export markets amid a global economic slowdown.
A closely watched survey of the sector suggested it made little contribution to the UK’s overall economic growth in the first quarter. Reflecting a crisis in Britain’s steel industry, a slowdown in the oil sector and sluggish demand overseas, manufacturing registered one of its weakest performances for three years, according to the Markit/CIPS UK Manufacturing purchasing managers’ index (PMI) report, reports the Guardian.
That echoed a downbeat picture of eurozone manufacturers in a survey for the region also released on Friday. But there was brighter news from China’s factory sector where activity expanded in March for the first time in nine months, according to an official poll. The UK report showed manufacturing employment fell for the third month running as new export business continued to decline.
The headline index on the PMI report edged up to 51.0 in March from February’s 34-month low of 50.8. That was above the 50-mark that separates growth from contraction but left the average reading for the first quarter of 2016 at just 51.6, equalling the lowest recorded since the PMI first moved back above the neutral 50.0 mark in early 2013.
Rob Dobson, senior economist at survey compilers Markit commented: “The UK manufacturing sector remained in the doldrums during the opening quarter of the year. Although March saw modest improvements in the trends for production and new orders, industry is still hovering close to the stagnation mark and will struggle to make a meaningful contribution to the next set of GDP growth figures.”
Manufacturers continued to rely on the domestic market for new business in March as factories reported that softer global economic growth dented new work from key trading partners such as the US and Europe. Some companies also said the weak oil and gas market had hurt sales to some regions – especially the Middle East.
The pound has weakened in recent months amid worries over the outcome of the UK’s EU referendum in June. On Friday, the pound weakened further, hurt by the gloomy manufacturing survey and as tight opinion polls fanned Brexit worries. The pound was down more than 1% against both the dollar and the euro. A weaker currency may help exporters, by making their goods cheaper overseas. However, Dobson warned the pound’s move was not all good news.
“Although the drop in sterling may add some bounce to export performance in coming months, the exchange rate is likely to cause as many issues on the cost side through higher import prices as it aids for demand,” he said.
“The data confirms subdued activity across the sector at the start of the year, coming on the heels of a flat 2015,” said EEF chief economist Lee Hopley.