Closely-observed statistics show that prices in Britain’s manufacturing industry have increased at the fastest pace in over three decades.
Disruption to supply chains remains a major issue across the sector, with orders from China and worldwide export levels slipping, IHS Markit/CIPS UK said in its latest UK manufacturing purchasing managers’ index.
Due to supply chain problems, many manufacturers have experienced shortages in components they need to produce their products. This has led to an increase in prices for these components.
Going up: Prices across Britain’s manufacturing sector have increased at their fastest rate in three decades, IHS Markit/CIPS said
But growth in the UK’s manufacturing sector still sped up for the second month in a row in November, despite squeezed supply chains.
Rob Dobson, director of IHS Markit said that although November witnessed some growth in output and new orders, the pace of growth was still slow compared with the first half.
“Manufacturers now face challenging circumstances, including rising supply chain disruptions, staff shortfalls, and inflationary pressures. These factors stifle growth, while continuing difficulties due to Brexit and logistical problems limit the opportunities to expand in overseas markets.
Data: Although activity in Britain’s manufacturing sector increased last month, there is still much to be done.
He said: “The current supply-side constraint, cost rises, skills shortages, and rising labour demand will increase the expectation of an imminent interest rate hike by the central bank. However, the survey shows how industry is vulnerable to new headwinds such as the Omicron variation.
According to the survey, British manufacturing companies increased their output for the eighth consecutive month of November.
Although the sector has seen growth for many months, it has not been expanding at an adequate rate.
Only in October did the sector reverse its five-month slowdown and it continued to do so last month.
UK Manufacturing PMI for November was 58.1. This compares to 57.8 and 57.1 respectively in October. It is still lower than August’s 60.3 score. Any score above 50 indicates growth.
Around three-quarters of the survey’s respondents said that prices had risen while fewer than one in a hundred reported a drop.
Duncan Brock is the CIPS’ group director. He stated: “New orders flows exacerbated the problem of manufacturing capacity with fastest intake for three month, and it was domestic that made up most of the new job.
“Export orders declined again due to lengthy lead times, ports and shipping issues causing some clients to lose patience with their suppliers and choose to source elsewhere.
The chart below shows sub-sectors. It illustrates output for different parts of the UK’s manufacturing industry.
Martin Beck, EY Item Club’s chief economic advisor, stated that there was no indication of supply-chain problems abating. And higher fuel, energy and raw material prices, alongside input demand outstripping supply, contributed to cost pressures rising at the fastest rate in the survey’s 30-year history.
“The Omicron Covid-19 will take into account these aspects. Supply chain disruptions in the UK or abroad could cause delays in the resolution of bottlenecks and may lead to new restrictions.
“But, manufacturers can benefit from tighter restrictions, as they could slow consumer spending on goods and services. However, this would increase supply pressures.
‘Additionally, oil prices have fallen more than 10 per cent since Omicron’s discovery was announced, which will reduce costs for energy-intensive producers. So, while it’s still too early to be conclusive on the economic effects of the new variant, the consequences for the manufacturing sector may not be all negative.’
This week, Made UK warned that Britain’s manufacturers are facing a ‘perfect storm’ crisis of soaring costs and spiraling debts that many fear could push them over the brink.
Fluctuations: This chart shows the manufacturing output over time and also displays production levels.
A leading trade association in the industry urged government to allow payment holidays for loans. They warned that there was a tipping point where thousands of businesses could lose their livelihoods.
Make UK said the UK’s manufacturing sector faced an ‘unprecedented combination of a post-Covid credit, cash and costs crunch’.
The report stated that factories struggled to pay off debts accrued to them to get them through this pandemic. It also mentioned that they were facing a host of challenges, including disruptions in supply chains and shortages for HGV drivers as well as energy prices.