UK manufacturing returns to growth for first time in 20 months

The UK’s manufacturing industry has returned to growth and is showing “tentative signs of recovery”, according to a closely-watched survey.

Both output and new orders increased in March, while business optimism also hit an 11-month high, S&P Global/CIPS UK found.

The firms’ manufacturing purchasing managers index (PMI) score rose to a better-than-expected 50.3 last month, up from 47.5 in February.

Any figure above 50 represents growth. March was the first time the threshold had been reached since July 2022 – 20 months ago – and comes following growing concern about the sector.

The survey also found other signs of stabilisation, with rates of contraction in employment and purchasing activity “slowing sharply”.

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S&P director Rob Dobson said: “The end of the first quarter saw UK manufacturing recover from its recent doldrums.

“Production and new orders returned to growth, albeit only hesitantly, following year-long downturns, with the main thrust of the expansion coming from stronger domestic demand.

“The upturn in demand also led to improved confidence among manufacturers, with positive sentiment hitting an 11-month high. Some 58% of companies expect their output to rise over the coming year.”

However, he cautioned that weak export performance and supply chain stresses remained – even if the impact of both was weakening.

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Maddie Walker, from Accenture UK, said: “It’s been a long winter for the UK’s manufacturing industry, but the first net growth in production levels marks the end of a year-long decline.

“This turnaround has been attributed to the fastest rise in new orders since May 2022 and better operating conditions.

“While this may encourage optimism for some, manufacturers should remain cautious. Despite this tentative return to growth and an increase in sector confidence, the issue of renewed inflation in the sector looms large – with the latest increase in purchasing prices being the steepest they have been for a year.”

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While there were positive signs domestically, overseas demand fell for the 26th successive month, the survey found.

Cara Haffey, manufacturing and automotive lead at PwC UK, said the contrast could be a sign of the “relative stability” domestically, as inflation falls, when compared to the ongoing disruption to supply chains faced by manufacturers with global vendors.

She added: “If domestic growth remains strong in comparison, it will be interesting to see if we observe a trend in the re-shoring of supply chains and operations as part of efforts from manufacturers to insulate themselves from logistical disruptions.”

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