The uncertainty surrounding the upcoming EU referendum did no favours for UK manufacturing in May, with activity more or less stagnant.
The Purchase Manager’s Index (PMI), which measures growth, came in at 50.1 — up from 49.4 in April — according to Markit. Anything above 50 signals growth, while below means contraction in activity. Clearly UK industry is not up to much.
While new manufacturing business improved a little domestically, new export business dropped for the fifth month in a row, something manufacturers linked to the general downturn in the global economy and the upcoming EU referendum.
Over a third surveyed by Markit said that uncertainty over a possible Brexit on June 23 was having a “detrimental” effect on their business, with 8% saying the impact was “strongly detrimental.”
Only 3% reported a “beneficial” impact, while almost 51% said it has no significant effect either way.
The main complaint was that the June 23 referendum — which sees “Remain” slightly ahead in most polls — made it hard to make long-term business decisions, and this was hurting sales and profits.
Investment also took a hammering as domestic and overseas companies wait to see the outcome. However, 80% of respondents said the referendum had no impact on their ability to hire suitable staff.
Here’s a look at the poll:
Rob Dobson, a senior economist at Markit, said a potential Brexit was hurting UK exports:
Although the domestic market remains positive for manufacturers, especially for producers of consumer and intermediate goods, softer global growth is weighing on new export orders. There are also signs that increased client uncertainty resulting from slower growth and the forthcoming EU referendum is weighing on investment spending. Manufacturers will have to wait and see whether this trend improves in the coming months.
David Noble, Group CEO at the Chartered Institute of Procurement & Supply, was even more negative:
Like a moving car with its brakes on, the sector moved at a sluggish, haltering pace barely registering progress over the last month. Any small pockets of new work, were firmly in the driving hands of the domestic market as exports remained lacklustre, affected by the slowdown in global economic growth.
Overall, job losses continued for the fifth month, though not all sub-sectors fared the same, as consumer and intermediate sub-sectors saw a rise in employment to meet a small rise in demand for their goods.
It is likely some manufacturers are maintaining a financial shield as a barrier against the uncertainties still affecting the sector, including those arising from the forthcoming EU referendum.