New business growth for UK manufacturers at three month high

But the performance remained relatively subdued when compared to the marked pace of growth seen by the PMI before the turn of the year. In fact, it is almost four points below the 51-month high reached in November 2017. Although the rate of increase in new business edged up to a three-month high, it remained among the weakest registered over the past year and-a-half. Output growth slowed from May’s five-month high and input cost inflation picked up, leading to increased selling prices. In fact, the average PMI reading over quarter two (54.2) is the weakest since the final quarter of 2016.

Worries over price increases, possible future trade tariffs, the exchange rate and Brexit uncertainty all played their part in dampening positivity, but a majority of respondents still expect rising output in future.

Tony Piggott, commercial development manager at Halo Financial, commented: “UK manufacturing activity continues to expand, albeit at a subdued pace compared to the final quarter of 2017. The ongoing uncertainty caused by escalating trade tensions globally, Brexit inaction and disagreement in Europe over immigration policy leave companies cautious to invest or enter into new orders.”

The upturn remained broad-based during June, the survey states. Output and new orders rose in the consumer, intermediate and investment goods industries. However, the overall rate of expansion in manufacturing output slowed, as growth of new order inflows improved only mildly.

On the other hand, June saw a solid improvement in the rate of job creation, with staffing levels rising at the quickest pace for three months. Employment increased in the consumer, intermediate and investment goods sectors. However, the overall rate of jobs growth remained below those seen through much of 2017.

Dorrien Peters, head of manufacturing at law firm Irwin Mitchell, said: “Input price rises, trade tariff uncertainty and ongoing Brexit worries are having an impact on the positive sentiment amongst manufacturers.”

"Within this backdrop of subdued growth, it was pleasing to see a solid improvement in job creation. We must remember though that it was below the job growth recorded in most of 2017, which highlights the challenges that are currently being faced by the sector."

Christopher Barlow, partner at accountants and business advisors, MHA Macintyre Hudson, added: “A subdued finish to the second quarter of the year with output growth slowing, but it is important to note that growth is still being reported. Higher output has been reported, but these were mainly fulfilled from backlogs of work and building of stocks.”

“There is a possible silver lining in terms of the rate of increase in new business, but it appears that despite some recent good news stories in the sector uncertainty is again ruling the day.”

Some companies noted that higher output had been partly sustained through inventory building and clearing backlogs of work. Rates of growth in new work received were broadly steady in both domestic and overseas markets. There was a rise in new export business, which was partly linked to increased sales to mainland Europe, China, South America and Australia.

Input cost inflation accelerated to a four-month high in June, with companies reporting a wide range of inputs rising in price. Some noted that cost increases were being exacerbated by shortages of certain raw materials. Part of the rise in costs was passed on as higher selling prices.

Despite that, business optimism remained positive in June. Over 51% of the survey panel forecast output to rise over the coming year, linked to market growth, investment spending, organic expansion, planned promotional activity and higher capacity.

Halo Financial www.halofinancial.com