UK manufacturing contracts at fastest pace in over three years on Brexit

The UK manufacturing sector contracted more than expected in July on the back of pre- and post-EU referendum uncertainty, according to data released on Monday.

The Markit/CIPS UK manufacturing purchasing managers’ index fell to 48.2 from 52.4 in June and came in weaker than the flash estimate of 49.1, marking the lowest level since February 2013.

This was only the second time since early-2013 that the PMI has fallen below the 50 level that separates contraction from expansion, with levels of production and incoming new orders both contracting as the impact of increased business uncertainty on the domestic market offset an exchange rate supported increase in new export business.

Rob Dobson, senior economist at survey compilers Markit, said: “The downturn was felt across industry, with output scaled back across firms of all sizes and across the consumer, intermediate and investment goods sectors, although exporters did report a boost from the weaker pound.

“However, the improvement in exports was less marked than previously estimated, blamed in part on sluggish overseas demand. The downside of the currency was an upsurge in input price inflation to a five-year high on the back of rising import costs.”

David Morrison, senior market strategist at SpreadCo, said: “This latest reading provides the Bank’s MPC with further evidence of a post-Brexit slowdown and makes a rate cut at Thursday’s meeting pretty much inevitable.

“The only question now is whether they back up a 25 basis point cut with an increase to the asset purchase facility as well.”