UK manufacturing performs sharp post-Brexit rebound

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British manufacturing performed one of the sharpest rebounds on record in August as manufacturing recovered from the shock of the UK voting to leave the European Union in June.

British manufacturing performed one of the biggest rebounds on record in August as manufacturing recovered from the shock of the UK voting to leave the European Union in June.

The widely regarded Markit/CIPS Purchasing Managers’ Index (PMI) jumped to a 10 month high of 52.3 in August after falling to a three year low of 48.2 in July after the referendum. The five-point increase was the joint largest in the survey’s history and beat all forecasts in a polls of economists by Reuters. Sterling leapt 0.71% against the dollar on the news, breaking through the 1.32 barrier.

This rebound was aided by a boost in exports due to the pound's drop in value following the referendum, pushing up overseas orders. Domestic output also bounced back and employment rose for the first time this year. The survey also suggested the recovery was broad and growth was seen across all manufacturing sub-sectors.

Dave Atkinson, head of manufacturing at Lloyds Bank Commercial Banking, commented: “British manufacturers have responded to the post-EU Referendum landscape by adopting a positive mind-set and adapting to the conditions in front of them to source new opportunities for their business. Growth is being driven by exporters, with manufacturers experiencing increased demand for goods from both existing markets and uncharted territories due to the weakened pound.”

“The manufacturing community has been agile in its response to this influx of orders, and cementing long-term relationships with new markets could have a significant impact on economic growth in the coming months and years as the outcome of leaving the EU is played out.”

Jeremy Cook, chief economist at WorldFirst, added: “After Brexit we have the Brebound and the currency effect. Companies in the manufacturing sector seem to be getting back to business and we are seeing order flows pick up from across the world as the devalued pound boosts the competitiveness of UK exported goods. This has driven the rate of growth to a 26 month high. There was a moderate rise in employment it seems but we believe that industry will hold off on a meaningful increase in employment until they are happy to call this a trend and not a blip.”

MTA CEO James Selka concurred: “The August rebound is really welcome news. Clearly the current exchange rate is having a positive effect on exports – MTA members have told us that it has made their products more competitive in global markets.

“That is good news in the short term, but in order to build on it the industry has to invest in new technology to be more productive and stay ahead of the competition. We’re confident that they will do that. While the politicians deliberate, Britain’s manufacturers are getting on with the job.”

Markit www.markit.com

CIPS www.cips.org

Company

CIPS

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