UK manufacturing sector ends 2023 on decline, PMI shows contraction

The decline was attributed to reduced intakes of new work from both domestic and export clients, leading to a tenth consecutive month of production decrease. The sector saw job losses for the fifteenth month, driven by redundancies, efficiency gains, and hiring freezes due to reduced demand and cost caution, S&P Global said in a news release.

New export business also continued to decline, notably affected by lower demand from key trading partners, including the US, mainland China, Europe, and Canada, although the rate of decrease showed some signs of easing. Despite the downturn, manufacturers reported a slow rate of contraction in new orders and expressed modest optimism for the coming year, fuelled by anticipated sales drives and new product launches. However, business optimism has dipped to a 12-month low, reflecting wider economic concerns and high interest rates.

Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing output contracted at an increased rate at the end of 2023. The demand backdrop also remains frosty, with new orders sinking further as conditions remain tough in both the domestic market and in key export markets, notably the EU. The downturn has hit manufacturers' confidence, which dipped to its lowest level in a year, and encouraged renewed cost caution with further cutbacks to stock levels, purchasing and employment.

“With concerns about high interest rates and the cost-of-living crisis hurting demand, the outlook for manufacturers in the months ahead remains decidedly gloomy. The downturn in demand is having some positive effects on supply chains, however, with suppliers reducing their prices for raw materials and vendor lead times showing a further improvement.”

ALCHEMPro News Desk (KD)