UK manufacturing has emerged from its worst spell since the financial crisis as a ‘Boris bounce’ lifted industry fortunes, new figures suggest.
The latest UK purchasing managers’ index (PMI) data for industry showed firms’ activity at least remaining steady for the first time since April 2019. It had seen nine straight months of decline, the longest downward slide since the global financial crisis more than a decade ago.
The headline figure on the index came in at 50 for January, indicating neither growth or decline. Last month it had come in at 47.5.
Output is no longer falling, but remains stagnant amid continued troubles including a global slowdown in demand and Brexit uncertainty.
Industry managers reported employment was no longer falling for the first time in nine months, but it also remained flat. Optimism hit an eight-month high, but was still low by historical standards.
The figures are based on a survey of around 600 manufacturers, and compiled by IHS Markit and the Chartered Institute of Personnel and Supply (CIPS).
It is the latest in a string of data signalling increased business and consumer confidence since prime minister Boris Johnson’s decisive election victory in December.
“The start of 2020 saw the performance of the UK manufacturing sector stabilise, as receding levels of political uncertainty following the general election aided mild recoveries in new order intakes, employment and business confidence,” said IHS Markit director Rob Dobson.
But a separate survey on Monday by advisory firm Crowe suggested the risk of future tariffs and global economic conditions were manufacturers’ main worries in 2020.
It remains to be seen if the revival in business confidence can last, as the UK government’s priorities appear increasingly at odds with industry’s concerns.
Prime minister Boris Johnson is expected to say in a speech on Monday that the government would accept a significant rupture with the EU if no trade deal can be reached.
Britain remains under EU rules as part of a Brexit transition period, meaning business as usual for many manufacturers.
But new talks will begin soon over Britain’s future trading relationship after the end of the transition from 2021.
The prime minister hopes for a Canada-style free trade agreement, with no tariffs or quotas on goods.
But he will also warn Britain will not commit to EU rules on everything from competition law to social, environmental, and employment protections.
His stance sets him on a collision course with Brussels, which has warned Britain’s current access to EU markets is reliant on aligning with EU standards.
A hard Brexit could cause heavy damage to UK manufacturers reliant on EU markets and supply chains.
“Hopefully the momentum will now build in spite of potential obstacles and the sector pulls itself up by its bootstraps into growth next month as the UK negotiates its position with the EU,” said Duncan Brock, CIPS group director.
But he said the latest figures showed firms had seen “a fairly muted start to the year as the sector crawled towards equilibrium.”
Domestic orders and UK consumer demand provided much of the boost, with exports continuing to fall for a third month in a row.