Inflationary pressures have begun to take their toll on British manufacturers, as Brexit, rising energy costs, supply chain disruption and the war in Ukraine continue to bite.
A closely watched survey released on Tuesday showed that about 85 per cent of British manufacturers registered an increase in purchase prices, with a majority of businesses passing on these costs to consumers.
Despite these challenges, the final reading of the British manufacturers’ purchasing manager’s index, compiled by S&P Global, rose to 55.8 in April, up from 55.2 in March.
According to Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, the small rise in the headline index was attributable to a “rise in the output index, as a previous easing of supply chain disruption enabled firms to work through order backlogs”.
Some involved in the sector have suggested that the positive headline figure risked obscuring the ongoing problems faced by British manufacturing.
Rob Dobson, director at S&P Global, said there was only one other time in the survey’s history that more companies reported experiencing higher input costs, commenting that “the inflationary situation is getting increasingly fraught”.
Dave Atkinson, SME and mid corporates head of manufacturing at Lloyds Bank, said: “Two months of war in Ukraine have shown just how reliant some UK manufacturers’ supply chains ultimately are on the country.
“Deepening shortfalls in the supply of metals, minerals, wheat and sunflower oil risk adding further inflationary risks and stifling businesses’ productivity across the automotive, aerospace, cosmetics, and food and drink industries as inventories deplete.”
The survey also revealed that UK manufacturers were increasingly coming to terms with obstacles associated with Brexit.
“Specific to the UK, Brexit represents an additional headwind, notably via lost EU customers, increased paperwork, customs checks and border delays,” said Dobson.
The multitude of price pressures on the sector mean that manufacturers are “the least upbeat about the outlook for growth in output over the next 12 months since December 2020, the last time lockdown measures were tightened substantially”, said Dickens.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said it was difficult “to see where ongoing growth will come from in the coming months as new-order growth was the most sluggish in over a year” and that “the global economy will need to pull a rabbit out of the hat to give manufacturers the leg-up they need”.
The possibility of additional disruption to trade from China’s lockdowns and the war in Ukraine meant there was a case for British manufacturers to continue to “minimise their exposure to the risk of materials shortages”, said Atkinson.
“Of course, this pressure on supply chains does present an opportunity for growth for the agile to diversify and reshore supply closer to home.”
Source: Economy - ft.com
