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‘Brexit buying’ driving manufacturing boost

UK manufacturing is experiencing a temporary boost in purchasing and exports, caused by companies across Europe taking last-minute action ahead of the end of the EU Transition Period.

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In November, input buying volumes in the sector reached their highest levels since March 2019 as clients brought forward orders, according to the latest monthly UK Manufacturing Purchasing Managers’ Index (PMI).

The manufacturing sector has now seen expansion for six successive months despite the ongoing difficulties caused by COVID-19. Rising orders from overseas - particularly from EU-based customers but also from Asia and the US - have played an important role in the uplift.

The upcoming end to the EU Transition Period has also led to increased stockpiling of raw materials, which is starting to result in extensive material shortages and shipping delays in some quarters, the research found.

Some parts of the manufacturing sector continue to perform better than others. The intermediate and investment goods industries both saw accelerated growths in output during November, but consumer goods experienced a second successive month of decline.

Rob Dobson, Director at IHS Markit, which compiles the monthly PMI survey, said:

“Growth of the UK manufacturing sector picked up in November, temporarily boosted by 'Brexit-buying' among clients and the ongoing boost from economies re-opening following lockdowns earlier in the year. The effects were strongest felt among firms supplying inputs to other companies as warehouses were restocked, and among producers of investment goods such as machinery and equipment.

“The weak point was the consumer goods industry, which saw lower output and new order intakes amid depressed household sentiment caused by mounting job losses and the UK re-entering lockdown. Whether the upturn of manufacturing production can be sustained into the New Year is therefore highly uncertain, especially once the temporary boosts from Brexit purchasing and stock building wane.”

Despite serious concerns around the immediate future, optimism in the manufacturing sector about future prospects rose to a six-year high in November, with 61 per cent of manufacturers expecting to increase their output over the coming year.

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