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Little respite for UK factories as calls for "radical" action grow

William Schomberg
FILE PHOTO: The spread of the coronavirus disease (COVID-19) in Dukinfield

By William Schomberg

LONDON (Reuters) - British manufacturers saw another sharp downturn in May, albeit less severe than in April, a report showed on Monday, as the sector called for "radical" government support to help companies survive the coronavirus crisis.

May's final IHS Markit/CIPS Manufacturing Purchasing Managers' Index (PMI) rose to 40.7 from April's record low of 32.6, but remained far below the 50 level that signals growth.

"UK manufacturing performance is continuing to delve depths unseen outside of the current pandemic with the rates of contraction in orders, output, and exports last month all among the worst in history," said Seamus Nevin, chief economist with industry group MakeUK.

Earlier on Monday, MakeUK called for a "more radical approach" from the government including the possibility of state-owned stakes in companies in aerospace, automotive and steel production.

Last week, Rolls-Royce <RR.L> had its credit rating cut to junk status by Standard & Poor's, a few days after the engine maker said it planned to cut more than a sixth of its workforce.

MakeUK said firms needed capital to service debts they have incurred to survive the lockdown and grow again after it.

So far, Britain's government has focused its coronavirus response on trying to save jobs with a wage subsidy scheme likely to cost more than 100 billion pounds ($123.86 billion).

Last week, Prime Minister Boris Johnson said he wanted to double down on his promises of investing more in infrastructure and technology. Media have said finance minister Rishi Sunak is planning to launch a big stimulus package before the summer.

Monday's PMI survey showed some signs of improvement: its output component -- which IHS Markit has said previously gives a better picture of the decline -- rose to 35.0 from 16.3.

But new working practices, doubts about how long coronavirus restrictions would last, weak demand and Brexit worries pointed to a slow recovery.

The rate of decline in employment in manufacturing was the second most severe on record after April's plunge.

Pockets of growth were mostly linked to healthcare and personal protection equipment.

Some firms reported signs of new inflows of business as clients began to reopen.

Britain's dominant services sector has been hit even harder by the lockdown. A final version of the PMI for services firms in the country is due to be published on Wednesday.


($1 = 0.8074 pounds)


(Reporting by William Schomberg; Editing by Catherine Evans)