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UK manufacturing downturn continues as firms hike prices

manufacturing  A worker cuts newly manufactured bars of steel at the United Cast Bar Group's foundry in Chesterfield, Britain, April 12, 2022. Picture taken April 12, 2022. REUTERS/Phil Noble     TPX IMAGES OF THE DAY
The downturn in the UK's manufacturing sector persisted in September, according to new figures from S&P Global. Photo: Phil Noble/Reuters

The UK’s manufacturing sector has continued its contraction for a third month in a row in September and orders declined for a fourth consecutive month, a survey has found.

The S&P Global/CIPS UK Manufacturing PMI scored 48.4 in September, from 47.3 a month earlier. August’s score had been the lowest for 27 months.

Anything below 50 is considered to show that the sector is shrinking.

Firms were also hit by soaring input costs, which led them to hike their own prices at an accelerated rate too.

"September saw new export business contract at the quickest pace since May 2020, with reports of lower demand from the US, the EU and China," S&P Global said.

Read more: UK consumers borrowed an additional £1.1bn last month as cost of living bites

"Manufacturers faced weak global market conditions, rising uncertainty, high transportation costs reducing competitiveness and longer lead times leading to cancelled orders," it added.

Contractions were seen across the consumer, intermediate and investment goods industries, with the steepest decline seen in intermediate goods producers.

"With existing headwinds from the cost-of-living crisis likely to be exacerbated by the current volatility in financial markets, growing economic uncertainty and further increases in borrowing rates, the industrial sector is likely to remain in the doldrums during the coming quarter to add to deepening recession risks," Rob Dobson, director at S&P Global Market Intelligence, said.

“The twelve month plus run of confidence in manufacturing output has come to an abrupt end as everyone has returned from the summer break. Even as late as July the PMI index was relatively healthy and manufacturers were still cautiously upbeat,” Simon Jonsson, UK head of Industrial Products at KPMG, said.

“But the economic headwinds of the ongoing squeeze on consumer demand, inflation, and the early signs of recession, have all combined to reduce confidence. This situation will not be improved by the recent volatility in capital markets."

Read more: UK is not in a recession, ONS confirms

The UK manufacturing PMI is compiled from responses to surveys sent to purchasing managers in around 650 British manufacturing firms.

“UK manufacturing needs to raise its efficiency to deal with these threats, but raising efficiency will require capital investment. The risk of significantly higher interest rates in 2023 will increase this challenge.”

Watch: What is a recession and how do we spot one?