Brexit uncertainty continues to weigh on UK businesses

The manufacturing sector is unlikely to make any contribution to GDP in the final quarter as global trade tensions and Brexit uncertainty continue to weigh on businesses.

Figures from the IHS Markit/CIPS UK Manufacturing purchasing managers’ index (PMI) showed a reading of 53.1 last month, higher than the 51.1 in October.

A figure above 50 indicates growth and the November PMI beat economists’ expectations of a 51.6 reading. However, growth was among the lowest recorded over the past two and a half years.

The survey showed that the growth in new orders came primarily from the UK domestic market with new product launches and companies stockpiling ahead of Britain’s departure from the European Union.

But orders from overseas dropped for the second consecutive month in November, which IHS said was the first back-to-back contraction since early 2016 as Brexit uncertainty took a toll on companies.

Rob Dobson, director at IHS Markit, which compiles the survey, said: “The November PMI provided a lacklustre picture of the UK manufacturing sector, as ongoing global trade tensions and Brexit uncertainty weighed on current business conditions and dampened the outlook for the year ahead.”

He said the survey suggests manufacturing output is on course to make “no contribution to GDP growth in the final quarter, with a clear risk of output contracting unless December proves a stronger month”.

“While demand from the domestic market was a positive spur, in some cases as clients built up stocks in response to Brexit and other supply-chain uncertainties, manufacturers also reported a further decrease in new export business as slower global economic growth and Brexit worries took a bite out of foreign demand.

“Brexit worries also increasingly dominated the outlook for the sector. Although still forecasting growth for the year ahead, manufacturers’ confidence fell to its lowest ebb since August 2016.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said, with overseas demand fragile, the manufacturing sector “does not have a buffer to withstand any lurch down in the domestic economy caused either by a no-deal Brexit or intensifying fears that this worst case might happen”.