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UK manufacturing hits another record high in May

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·3-min read
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File photo dated 10/10/19 of workers on the production line at Nissan's factory in Sunderland. The number of cars built in the UK has fallen for the 18th month in a row, showing the ongoing impact of the coronavirus crisis on the industry, figures show. Issue date: Friday March 26, 2021.
Workers on the production line at Nissan's factory in Sunderland. The UK's manufacturing sector has been buoyed by a reopening boom in economic activity. Photo: PA

UK manufacturing activity has continued its upward trajectory in May, thanks to a reopening-driven boom in activity. 

IHS Markit's closely-watched purchasing managers' index (PMI) scored 65.6 in May — a record high, with new work intakes also rising at record rate.

Conditions in the manufacturing sector improved at an unprecedented rate in May, as output growth strengthened and new orders rose at the quickest pace in the near three-decade survey history. 

Looser pandemic restrictions and high levels of pent-up demand meant that the rapid revival in labour market conditions continued, with staffing levels also rising at a record pace.

This follows a record month in April, where it clocked its highest reading in 27 years. 

The PMI has signalled improvement in each of the past 12 months.

April's growth was driven by a third straight month of higher new orders, helped by stronger client confidence and the reopening of more parts of the economy.

Reopening has put a spring in the step of manufacturers, an industry which has been hit hard by both lockdown restrictions and the end of the Brexit transition period in January. 

Markit said May's figures underpin the latest increase, and that companies linked new order growth to rising business confidence, the further re-opening of the UK economy and reduced issues relating to COVID-19.

Read more: European markets open higher amid third wave fears

“The corollaries of this strong upsurge in industrial activity are increased strain on supply chains and a build-up of price pressures," said Rob Dobson, director at IHS Markit. 

"Supplies of inputs into manufacturers and finished goods on to clients are both being severely disrupted by raw material shortages, port issues, COVID restrictions, post-Brexit difficulties and market forces as demand outstrips supply. 

"Suppliers’ delivery times subsequently lengthened to one of the greatest extents on record, while input costs and selling prices both rose at unprecedented rates. With little sign of supply pressures receding, these price rises will become more visible to consumers.”

Concerns also remain about price inflation on materials as well as the broader inflationary picture as economies begin to recover across the world. 

“Material shortages and shipping delays are still being widely reported, leading to significant backlogs of uncompleted work as firms struggle to boost operating capacity to accommodate the surging inflows of new orders," said Sarah Banks, managing director of freight and logistics at Accenture Global. 

"This has caused shipping and air freight rates and selling price inflation to run significantly above anything previously seen. With the economy rebounding faster than expected, manufacturers will likely feel supply chain pinch points that have only bubbled below the surface of global trade to date.

“With the strain on capacity expected to last throughout the summer, it is now a critical time for companies to reassess their current logistics strategies and look at ways in which they can futureproof their supply chain. In doing so, they will be able to mitigate disruption and respond swiftly to upswings in demand.”

The positive numbers come following a survey published in May that showed nearly half of smaller British manufacturers expect to recover to their pre-pandemic health in the coming months, with investment and hiring plans on the rise.

Business support groups South West Manufacturing Advisory Service (SWMAS) and Manufacturing Growth Programme said 48% of small and medium-sized manufacturers expected to meet or surpass their pre-COVID position in the next three months.

Watch: What is a budget deficit and why does it matter?

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