Britain’s factories suffered a slowdown in growth to an eight-month low last month as manufacturers were hit by the twin headwinds of Brexit uncertainty and a stronger pound.
The IHS Markit/CIPS survey showed that manufacturing output remained robust and above the historic average, but the purchasing manager’s index (PMI) that measures activity across the sector slipped to 55.2 in February, its second-lowest reading since the June 2016 Brexit vote. A figure above 50 indicates growth.
IHS Markit said the figures suggested output growth so far this year had slowed dramatically to a three-monthly rate of 0.4%, compared with a more robust 1.3% in the last three months of 2017.
Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said the trend revealed that the currency dividend from the Brexit vote, which led to a steep fall in sterling’s value, had waned and British goods were no longer as cheap abroad as they were last year.
A slowdown in the stellar expansion across the eurozone last year had also played a part in British firms experiencing lower growth, he said.
“Growth in the manufacturing sector is moderating, now that the recovery in the eurozone has started to lose a little pace and more than 18 months have elapsed since sterling’s huge depreciation,” he said.
Dave Atkinson, a spokesman for Lloyds Bank Commercial Banking, said the sector was in a positive mood despite the slowdown and was bringing forward plans for investment.
“Recent [official] figures show sector productivity is increasing, although there is still some way to go before the UK catches up to its G7 counterparts,” he said. “But manufacturers are taking steps to make this happen by investing in automation and exploring the opportunities presented by Industry 4.0.
“Many are using specialist asset finance facilities to invest in equipment, protecting their working capital which can be used to support growth opportunities,.”
Bank of England lending figures for February showed a steep rise in borrowing by manufacturers for investment, maintaining a trend that started last April.
Factory output growth slipped across the eurozone, but still enjoyed its best spell of expansion in almost two decades. IHS Markit’s manufacturing PMI for the eurozone fell to 58.6 in February from 59.6, just pipping an earlier flash estimate of 58.5.