Manufacturing sector struggles to make impact on economy | RBS Invoice Finance

Manufacturing sector struggles to make impact on economy

The UK manufacturing sector performed at its weakest level in three years during the first quarter of the year, amid a fall in export demand and struggling oil and steel sectors.

The most recent Purchasing Managers’ Index (PMI), published by Markit/CIPS, showed that the average index reading for the manufacturing industry in the first three months of 2016 was just 51.6. Employment in the industry fell, while the performance of the wider European manufacturing sector was also struggling.

The PMI results show that the sector as a whole is contributing little to the country’s overall economy at the moment, according to Markit’s Senior Economist, Rob Dobson. He stated:

"The UK manufacturing sector remained in the doldrums during the opening quarter of the year. Although March saw modest improvements in the trends for production and new orders, industry is still hovering close to the stagnation mark and will struggle to make a meaningful contribution to the next set of GDP growth figures."

He went on to explain how the industry is likely to continue to face challenges over the coming months:

"Although the drop in sterling may add some bounce to export performance in coming months, the exchange rate is likely to cause as many issues on the cost side through higher import prices as it aids for demand.

"This could apply an unwelcome additional strain to manufacturers' margins, coming at a time when many are still having to pass on lower commodity prices to maintain competitiveness and alongside the introduction of the National Living Wage."

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