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Manufacturing sector shows signs of post EU Exit stabilisation

Manufacturers are showing signs of renewed optimism heading into 2020 after months of political uncertainty, with the latest surveys suggesting the sector is stabilising.

According to the UK Manufacturing Purchasing Managers’ Index (PMI) for January, the sector has reached a neutral footing after nine months of continuous decline stretching back to April 2019.

Reduced levels of political uncertainty following the General Election in December led to mild recoveries in domestic orders and production volumes, particularly in the consumer and intermediate goods sectors, although concerns remain around export orders and investment goods.

January also saw inventories of purchases decline at the fastest pace for nearly a decade as companies began to reduce their ‘Brexit safety stocks’.

Meanwhile, a separate survey of 300 manufacturers by the CBI found that business confidence has increased at the fastest pace since 2014 over the last quarter.

Anne Leach, Deputy Chief Economist at the CBI, said:

“With business optimism improving at its fastest pace since 2014 and some of the squeeze on investment plans lifting, it’s clear manufacturers are entering the new year with a spring in their step. Firms are now planning to invest more in plants and machinery, which will ultimately help increase capacity and output.”

Seamus Nevin, Chief Economist at Make UK, commented:

"The UK manufacturing sector emerged from its longest decline since the 2008 Global Financial Crisis last month, as December’s election result reduced levels of political uncertainty and an improved domestic demand saw a small improvement in new orders and a stabilisation of production volumes.

“Business confidence, however, remains fragile and concerns about our future trade rules mean export orders are still falling. This is the main cause for concern so all eyes will be on the nature and quality of any trade deals secured over the next 11 months."

 

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