The UK’s manufacturing sector on Friday experienced a significant decline in activity, reaching its lowest point since the initial COVID-19 pandemic lockdowns.
According to the Purchasing Managers’ Index (PMI), this downturn is second in severity only to the first lockdown in May 2020 and rivals the conditions witnessed during the global financial crisis of 2008-2009, as reported by S&P Global.
In August, the PMI plummeted to 43 points, down from July’s 45.3, falling well below the crucial threshold of 50, which signifies an expanding output.
S&P Global attributed this decline to various factors, including manufacturers grappling with a deteriorating economic environment.
These challenges include the adverse impacts of rising interest rates, a cost-of-living crisis, reduced export opportunities, and growing uncertainty regarding the market’s future prospects.
“August saw manufacturing sink into a deeper downturn, with rates of contraction in output and new orders among the steepest registered outside of events such as the global financial crisis or COVID-19 pandemic,” it said.
“Manufacturers are reporting a weakening economic backdrop, as demand is hit by rising interest rates, the cost-of-living crisis, export losses and concerns about the market outlook,” it added.
Commenting on the latest survey results, Rob Dobson, director at S&P global market intelligence, said: “The PMI sank to a 39-month low as output and new orders contracted at rates rarely seen outside of major periods of economic stress such as the global financial crisis of 2008/09 and the pandemic lockdowns.”
While this is being felt across the manufacturing industry, business-to-business companies are particularly hard hit. Intermediate goods producers saw the steepest drops in output, new orders, and employment as a result, he added.
“…The survey data therefore suggest policymakers will become increasingly focused on concerns over the economy’s health as they mull the need for further rate hikes,” he concluded.