Business

Manufacturers suffer significant slump amid 'unrelenting uncertainty'

BCC says its findings point to a worrying drop-off in UK economic activity in the last quarter
BCC says its findings point to a worrying drop-off in UK economic activity in the last quarter BCC says its findings point to a worrying drop-off in UK economic activity in the last quarter

THE UK economy is sagging under the weight of "unrelenting uncertainty" amid a continuing slump in manufacturing, new research suggests.

A survey of 6,600 companies employing 1.2 million workers indicated that manufacturers suffered a "significant" deterioration in the three months to September.

The British Chambers of Commerce (BCC) said its study showed that domestic and export sales had fallen in the manufacturing sector, while services firms also reported a decrease in orders.

The BCC said the findings were "alarming", and said it showed how urgent action was needed from Westminster.

Suren Thiru, head of economics at the BCC, said: "Our findings point to a worrying drop-off in UK economic activity, with unrelenting uncertainty over Brexit and a notable slowing in global growth prospects dragging down almost all the key indicators in the quarter.

"The manufacturing sector continues to toil under the weight of diminishing cashflow, weakening global demand and disrupted supply chains, and the data indicates that the sector was a drag on UK GDP growth in the quarter.

"Although the slowdown in a number of the key service sector indicators was relatively modest, slowing activity in the sector is a concern given its dominant share of overall UK economic output.

"A stuttering services sector coupled with a worrying downturn in manufacturing activity indicates that any bounce back in UK GDP growth from the contraction in the second quarter is likely to be underwhelming at best.

"Looking forward, weakening orders, confidence and investment intentions suggest that unless action is taken, the UK's current weak growth trajectory could drift markedly lower over the near term."

BCC director general Adam Marshall added: "This is a reality check, not scaremongering or politicking. These are some of the worst figures we've seen in a decade - and jobs, businesses and the future success of our communities are on the line.

"Behind each and every one of these statistics sit thousands of real businesses, who are feeling the cold harsh winds of Brexit uncertainty and global trade turbulence right now.

"We need to see immediate action to avoid a messy and disorderly Brexit on October 31, alongside bold measures to stimulate investment and confidence across the UK.

"The government must also make urgent preparations to support business cashflow, where the strains of acute uncertainty are hitting businesses, and particularly manufacturers, hard."

Meanwhile the closely-watched IHS Markit/CIPS UK services purchasing managers' index (PMI) showed a worse-than-expected reading of 49.5 in September, down from 50.6 in August (a figure above 50 indicates growth, below that represents contraction).

It marks the first contraction since March and only the fifth in more than a decade.

The services report follows PMI surveys which showed that output also fell across construction and manufacturing, with the all-sector index contracting for the second month in a row - the first such back-to-back contraction since the final two months of 2012.

The all-sector reading also shows the steepest decline since July 2016 following the EU referendum.

It points to a potential 0.1 per cent fall in gross domestic product (GDP) in the third quarter, which would put the UK in a technical recession, following a 0.2 per cent decline between April and June.

Chris Williamson, chief business economist at IHS Markit, which compiles the survey, said: "Only the collapse in confidence immediately following the 2016 referendum has seen a steeper overall deterioration in the economy during the past decade, but September's decline is all the more ominous, being the result of an insidious weakening of demand over the past year rather than a sudden shock.

"At current levels the surveys point to GDP falling by 0.1 per cent in the third quarter which, coming on the heels of a decline in the second quarter, would mean the UK is facing a heightened risk of recession."