Growth in the UK’s manufacturing sector has slowed to its weakest pace in five months, with smaller firms facing increased pressure. However, new figures reveal that hiring activity within the industry has surged to its fastest rate in two years.
The S&P Global UK manufacturing PMI survey recorded a reading of 51.7 in August, a slight decrease from 51.9 in July. While a reading above 50.0 indicates growth, August’s figure represents the slowest expansion in activity for ten consecutive months. Factory output has been rising for five months, fueled by higher demand for new work both domestically and internationally.
The survey highlighted a divergence within the industry. Smaller manufacturers experienced declines in output and demand for new work, while medium and larger companies saw growth. The overall slowdown was partly attributed to reduced stock purchasing, as some businesses remained cautious due to energy price volatility linked to the Iran war.
Despite the growth slowdown, hiring improved significantly. Businesses expressed greater optimism about future conditions, with employment in the sector rising for the fifth consecutive month at its fastest pace in two years. Business confidence also reached a six-month high.
Rob Dobson, director at S&P Global Market Intelligence, noted that the slowdown was likely driven by a reduced focus on precautionary stock-building as economic uncertainty eases, with domestic and overseas clients still showing a willingness to spend, albeit cautiously. However, Matt Swannell, chief economic adviser to the Item Club, cautioned that manufacturers might face challenges in the coming months due to the ongoing fallout from the Iran war, including higher energy costs and the potential squeeze on household spending power from rising inflation. The conflict in the Middle East remains a key source of uncertainty.
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