Supplier delivery times for UK manufacturers grew to one of the longest levels in the past three decades in January as Covid-19 restrictions and Brexit disruptions constrained factory production.
The IHS Markit/Cips purchasing managers’ index, a weighted average of businesses’ assessment on output, new orders, employment, suppliers’ delivery times and stocks of purchases, fell to a three-month low of 54.1 in January, down from December’s three-year high of 57.5.
The reading was higher than initial estimates of 52.9 and well above the 50 mark, which indicates a majority of businesses reporting improvement.
However, the headline figure was distorted by the lengthening of supplier lead times, which apart from April 2020 was the highest registered in the survey’s near 30-year history.
New manufacturing order intakes fell in January, while the growth in output slowed markedly.
Survey panellists attributed the weakened order intakes to the new Covid-19 restrictions, the end of the Brexit transition period, client closures and renewed uncertainty, according to Rob Dobson, director at IHS Markit.
“Whereas many countries are seeing manufacturers provide a much-needed support to economic growth as the service sector is hit by Covid-19, the UK’s manufacturing sector has come close to stalling,” he said.
“A mixture of harsher Covid-19 restrictions and Brexit led to near-record supply-chain disruptions, lower exports and increased costs.”
The survey also reported that EU-based clients had brought forward purchasing to avoid expected disruption.
Fhaheen Khan, senior economist at Make UK, the manufacturers association said: “Today’s data shows yet more evidence of the impact of Brexit beginning to bite.
“The impact of both Covid-19 and leaving the EU could linger for many years to come. That is why the UK manufacturing sector needs a domestic plan for growth that prioritises innovation, skills and an outward strategy to increase exports globally.”
Input shortages led to increased input prices, with the corresponding index rising to the highest in four-year high in January.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “As the delivery of important goods was nearly totally immobilised in some sectors, this resulted in overall manufacturing cost inflation rising to a four-year high.”
Separately, the Bank of England revealed that UK mortgage approvals remained high in December despite slipping from a 13-year record high in the previous month.
In 2020, mortgage approvals for house purchase rose to 818,500, up from 789,100 in 2019, notwithstanding house purchase approvals hitting a record low of 9,400 in May 2020.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said December was “probably the last month of the mortgage lending boom”.
The UK property market has been boosted by the stamp duty holiday since its introduction in July but this finishes at the end of March.
The Bank of England data also showed that household’s consumer credit “remained weak” in December, while household saving rates rose again to the highest level since May, reflecting constraints on spending due to Covid-19 restrictions.
Ruth Gregory, senior UK economist at Capital Economics, said: “With businesses now struggling with a mountain of debt, it is clear that it will be down to consumers to drive the recovery once the restrictions are eventually lifted.”