UK manufacturing sector exhibits signs of stabilisation

Wednesday 05th February 2020 04:44 EST

The British manufacturing sector showed signs of stability last month, in a U-turn on the longest plunge since the financial crisis. A survey released by IHS Markit and the Chartered Institute of Procurement and Supply showed that the factory output remained steady in January after eight months of contraction.

The IHS Markit/Cips manufacturing purchasing managers' index (PMI) rose to 50 in January, up from the previous month's 47.5. The reading was marginally higher than the 49.8 “flash” estimate made last month. It should be known that anything above 50 separates growth from contraction.

The new orders and business confidence was helped by reduced levels of political uncertainty following Boris Johnson's unexpected decisive election victory. Despite the improvement in the PMI reading, growth in the manufacturing sector, which accounts for about a tenth of the economy, remains at stall speed due to a broader global slowdown and lingering uncertainty over Brexit.

Director at IHS Markit, Rob Dobson said the survey of about 600 manufacturers indicated that business investment remained depressed. He added, “A full revival in capital spending may still be some way off, likely reflecting lingering uncertainty about the Brexit roadmap in the coming year.”

UK manufacturers have developed close ties and complex supply chains with their EU counterparts after almost half a century of EU membership. The stabilisation in business confidence among manufacturers comes after a difficult period for industrial firms around the world.

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