Purchasing Manufacturing Index (PMI) figures released by Markit on July 1 indicate encouraging news for the U.K.’s manufacturing sector. The PMI figures showed their highest increase in five months at 52.1, up from 50.4 in the previous month.
According to the data from Markit, new orders were also on the increase, and they were accelerating at the fastest pace since October 2015. However, there was less positive news on the employment front, with further job losses in the manufacturing sector being reported for the sixth consecutive month.
Commenting on the figures, Rob Dobson, senior economist at Markit said
“With 99% of survey responses received before the end of 23rd June, the latest PMI signalled that the manufacturing sector has started to move out of its early year sluggishness in the lead up to the UK’s EU referendum.”
CBI figures indicate greater stability
In further positive news, figures released by the CBI indicated greater stability for the manufacturing industry. Its Industrial Trends Survey showed order books had gained in strength, with the food and drink sector among those receiving a boost.
Manufacturing output and selling prices also showed signs of stabilising, and manufacturers are optimistic they will continue to increase in the next quarter.
The Brexit Effect
However, it needs to be considered that both sets of figures were compiled before the results of the Brexit vote were known and it will be some time before the full effects of leaving the EU are felt by businesses.
There are concerns that the on-going certainty following the vote could impact on current business deals. In addition, it is not yet known what trade deals the UK government is going to be able to secure during its negotiations with the EU, or whether it will be possible for the UK to keep access to the single market.
As uncertainty remains, the CBI are calling on the government to draw up firm plans for the UK and its future without EU membership, and it’s urging ministers to establish a framework, which would enable businesses to work effectively with the government.
Brexit and Challenges for the Manufacturing Industry
The fall in the pound following the vote has already left some businesses concerned over the rising prices of imports, which they feel they might have to pass on to customers. Also, the manufacturing industry is likely to face further challenges due to the increase in import costs