UK manufacturing activity hits seven-year low in August

A key gauge of UK manufacturing sector conditions hit a more than sever-year low last month as "high levels" of economic and political uncertainty both at home and abroad took their toll and confidence in the outlook plumbed its lowest ever reading.

IHS Markit's manufacturing sector gauge fell from July's level of 48.0 to 47.4 (consensus: 48.3) for August - its softest reading since July 2012.

New orders drove the PMI lower, with the sub-index tracking them falling to an 85-month low as orders fell across all sectors, in turn weighing on output in all segments of manufacturing: consumer, intermediate and investment goods.

"Where a decrease in new orders was reported, this was linked to weaker domestic and global economic conditions, low market confidence, Brexit concerns, business uncertainty and a slowdown in client spending," IHS Markit said.

New export business also shrank at its fastest pace in over seven years in August, with inflows of new work from the States and Asia both declining.

The survey compiler also mentioned reports that clients based in the European Union were rerouting supply chains away from Britain.

Some cross-current were also evident in the data, with some firms reducing the safety stocks that hey had built up in the run-up to the original Brexit date even as other companies made preparations for a withdrawal in October.

An index measuring manufacturers' confidence meanwhile fell to its lowest level since July 2012, when IHS Markit began canvassing firms about their outlook.

The prices charged by firms also increased, as companies passed "solid" input price increases onto their clients, with over 80.0% of respondents making at least some reference to the weaker exchange rate as a reason for the higher input costs.

"Based on its historical relationship against official ONS data, the latest PMI Output Index is consistent with a quarterly pace of contraction close to 2%," said IHS Markit director Roy Dobson.

"The outlook also weakened as the multiple headwinds buffeting the sector saw business optimism slump to a series-record low."

"The renewed fall in the manufacturing PMI in August—to its lowest level since July 2012—indicates that support from another round of no-deal Brexit preparations currently is too modest to insulate U.K. producers from the global downturn," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"The U.K.’s PMI is only trivially above the Eurozone’s—47.0 in August—and the former might even fall further, given that the new orders index slumped to 44.4, from 46.9 in July."