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UK factory growth hits seven-month low due to supply chain disruptions

·2-min read
UK manufacturing
Manufacturing production increased for the 16th consecutive month in September. Photo: Jeff J Mitchell/WPA Pool/Getty Images

The ongoing supply chain disruption and labour shortage has constrained growth in the UK manufacturing sector, new data has shown.

According to IHS Markit’s manufacturing purchasing managers' index (PMI), the rate of expansion last month fell to its weakest since February, hitting a seven month low.

The PMI slipped to 57.1 in September, down from 60.3 the previous month, but beating flash estimates of 56.3. Any reading over 50 indicates growth.

Manufacturing production increased for the sixteenth consecutive month in September, however, in addition to the supply chain delays, the slowdown was caused by an easing of new orders and rising costs of materials.

The PMI slipped to 57.1 in September, down from 60.3 the previous month, but beating flash estimates of 56.3.
The PMI slipped to 57.1 in September, down from 60.3 the previous month, but beating flash estimates of 56.3

New export business also fell for the first time in eight months, while jobs growth fell to the weakest since January. Jobs growth slowed at medium and large sized companies in particular.

Where higher employment was recorded, this was generally to meet production requirements, combat rising backlogs of work and preparations for future growth, IHS Markit said. Outstanding business increased at one of the fastest rates on record, with over 30% of firms experiencing an expansion.

Rob Dobson, IHS Markit director, said: “The September PMI highlights the risk of the UK descending towards a bout of 'stagflation', as growth of manufacturing output and new orders eased sharply while input costs and selling prices continued to surge higher.

“Companies are facing a growing list of headwinds, which includes declining new export orders, component shortages, delays to air, land and sea freight, staff shortages exacerbated by COVID-19 illnesses, Brexit disruptions, sharply rising costs and now fuel shortages.”

Read more: UK service sector growth slows amid staff shortages and supply chain disruption

Meanwhile, Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “The sector is feeling the strain of an ongoing onslaught of snags and hitches at every stage of the supply chain from sourcing raw materials through to component shortages and delivery disruptions. 

"Like a whack a mole game where once one difficulty is resolved, another appears soon after, the sector may be challenged but remains stoically convinced that things can only get better in 2022 once the next few gruelling months are at an end.”

Watch: Shortage of HGV drivers 'not surprising' but Brexit 'not the main cause'

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