UK manufacturers last month stockpiled inputs at the fastest pace since comparable records began 27 years ago, as they prepared for potential supply-chain disruption amid no-deal Brexit fears, a key survey reveals.
The survey, published by the Chartered Institute of Procurement & Supply and IHS Markit yesterday, also signals manufacturers ramped up their stocks of finished goods to try to ensure they are able to meet contractual requirements. The rise in manufacturers’ finished goods stocks in January was the third-fastest monthly increase since comparable records began in 1992.
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UK manufacturers recorded an overall monthly reduction in staffing for only the second time since mid-2016 in January, the survey signals, as production volumes increased at the weakest pace in two-and-a-half years.
Investment goods output contracted last month for the first time since July 2016.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said this provided “further evidence that investment is being hit by uncertainty”.
UK manufacturers’ confidence about the prospects for increased activity on a 12-month time horizon was at its weakest for 30 months. New business growth in the sector slowed to its weakest pace for three months in January. New export orders were almost stagnant.
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Rob Dobson, director at IHS Markit, said: “The start of 2019 saw UK manufacturers continue their preparations for Brexit. Stocks of inputs increased at the sharpest pace in the 27-year history, as buying activity was stepped up to mitigate against potential supply-chain disruptions in coming months. There were also signs that inventories of finished goods were being bolstered to ensure warehouses are well-stocked to meet ongoing contractual obligations.”
He added: “Despite the temporary boost provided by clients’ pre-purchases and efforts to build up stocks, the underlying trends in output and new orders remained lacklustre at best. Growth of new-order inflows slowed sharply...contributing to the weakest trend in output since the month following the EU referendum - July 2016.”
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Duncan Brock, group director at CIPS, said: “Brexit blight strikes again with the weakest performance in manufacturing production since July 2016, and optimism withers away under the weight of uncertainty as the UK teeters on the edge of departure from the EU.
“Businesses did their best to develop forward purchasing programmes to avoid potentially disappointing clients and in case of a bad Brexit outcome with some of the sharpest rises in raw materials and finished goods [stocks] since the survey started in January 1992.”
He added: “Supply chains were closer to breaking point with stretched capacity and delivery times lengthening again for the 33rd month. This begs the question of how much longer suppliers can deliver and businesses can retain stocks for every eventuality.”
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