UK manufacturing contracts as new orders fall and costs rise; house prices drop in April – business live

The UK’s manufacturing sector suffered a fresh downturn last month as disruption to shipments in the Red Sea hit firms

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Geopolitical instability hurt UK factories last month, reports Caroline Litchfield, partner and head of manufacturing and supply chain sector at Brabners:

“Hopes of a recovery in the UK’s manufacturing sector will need to be put on ice for now, as March’s lift in activity proved an anomaly.

“Indeed, supply-side barriers including delays to raw material deliveries and high input cost rumble on.

“This is a reminder that growth prospects for manufacturers teeter on a knife’s edge.

More ominously there are indications that businesses are hiking their prices again at the fastest rate in over a year, outpacing any decision to soften the base rate from the Bank of England and highlighting that inflation can occur despite tightening monetary policy. The sector seems to be returning to the situation it found itself in only a year ago with low demand, high inflation and no clear route back to prosperity.

The UK’s manufacturing sector experienced a modest pullback in April, breaking the trend of recovery and slipping back into contraction. Growth was hampered by lower output levels linked to weaker market conditions overall, which is also showing in a weaker labour market. The drop down to 49.1 is still only slightly below the magic 50 mark. The next few months will tell us if this flatlining is a true reversal of the recent recovery trend or not.

“Zooming out to the wider economy, we are seeing a story of two halves. The service sector remains strong, and April saw service sector firms accelerate growth to the strongest level for 11 months. This month’s PMI again emphasises that manufacturing is the weak link in the economy. There are also signs of possible price pressures building for the future - wage bills are growing, and input prices are increasing.

“Manufacturers’ output falling back into contraction after a month of growth in March suggests the economic headwinds that have been affecting the sector this year are still bearing down on firms.

“Despite this fall, there is still cause for optimism. Inflation is slowly falling, which should help to boost demand and consumer confidence this year, and firms are benefitting from deepening their relationships with UK suppliers to minimise the impact of any future global supply chain shocks.

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