U.S. markets close in 4 hours 37 minutes

UK manufacturing sector slumps at fastest rate in 8 years

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Britain's Prince William, Duke of Cambridge (R) wears a hard hat and protective clothes as he speaks with Works Manager Carl Banfield during his visit to the Tata Steel plant in Port Talbot, south Wales on February 4, 2020. (TOBY MELVILLE/POOL/AFP via Getty Images)

UK manufacturing output and new orders have declined at the fastest rate in eight years due to the coronavirus pandemic, according to a survey of business leaders.

Data provider IHS Markit said on Wednesday its closely watched purchasing managers’s index (PMI) for the manufacturing sector fell to 47.8 in March.

The index is measured on a scale of 0 to 100, with anything above 50 signalling growth and anything below signalling contraction. It slipped into contraction from a reading of 51.7 in February.

“The latest survey numbers underscore how the global outbreak of COVID-19 is causing huge disruptions to production, demand and supply chains at UK manufacturers,” said Rob Dobson, Director at IHS Markit.

Dobson said factories were facing shortages of part as supply chains are disrupted. New orders are also diving as the global economy freezes over.

“Output and new orders fell at the fastest rates since mid-2012, while supplier delivery times lengthened to the greatest extent in the 28-year survey history as shortages grew more widespread,” he said. “The resulting job losses took the rate of decline in employment to its highest since July 2009.”

All major car manufacturers have closed factories across Europe in recent weeks in response to the spread of COVID-19.

Read more: Carmakers shut plants in Europe as coronavirus hobbles supply chains and dents demand

Dobson said all areas of UK manufacturing saw slumping demand in March, with the exception of food and pharmaceuticals.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), which helps put together the survey, said: “The manufacturing sector was knocked sideways by the impact of COVID-19 and into contraction territory.

“With supply chains crumbling around the world, we can only expect a worsening outlook next month as increasingly necessary lockdown measures squeeze manufacturing production.”

Seamus Nevin, Chief Economist at Make UK, the manufacturers’ organisation, said: “Many firms have had to shut and lots of those that remain open have seen orders or output suffer. Others have switched to making products that are vital to the national attempt to stop the spread of the virus; a testament to why backing manufacturing is so important.

“At the start of this year manufacturing companies reported unprecedented optimism about investment and trade but that had all been swept away by current events.”

IHS Markit’s final manufacturing PMI for March was worse than an earlier estimate made mid-month, which came in at 48. However, economists had expected Wednesday’s figure to drop to 47, meaning the final result was slightly better than expected.

Data for the rest of Europe, which was also published by IHS Markit on Wednesday, pointed to an even sharper manufacturing slowdown on the continent. Eurozone manufacturing registered a PMI of 44.5 in March, with contractions in activity across Spain, Italy, France, Germany, and Switzerland.