UK manufacturing sector contracts with more pain ahead for producers
Activity in the UK manufacturing sector contracted more than previously thought in December, according to revised estimates from S&P Global on Thursday, as output, new orders and employment all declined at faster rates.
The manufacturing purchasing managers' index for December fell to 47.0, down from 48.0 in November and below the initial estimate of 47.3 released two weeks ago.
This was the lowest mark for the PMI in 11 months and was the third straight reading below the key 50-point level, which separates growth from contraction.
Client destocking, subdued market confidence and operational restructuring ahead of forthcoming legislative changes weighed heavily on output and demand during the month, and "reinforced ongoing efforts to achieve cost efficiencies", S&P Global said.
Notably, business optimism fell to its lowest in two years, with manufacturers citing concerns about a lack of market confidence, inflationary pressures, rising costs (especially for employer national insurance contributions and payrolls) and expectations of weaker future economic growth.
“A stalling domestic economy, weak export sales and concerns about future cost increases led to the steepest contraction of UK manufacturing production for almost a year in December," said Rob Dobson, director at S&P Global Market Intelligence.
“Manufacturers are facing an increasingly downbeat backdrop," Dobson said, citing the government's announced policy changes as the reason for a recent drop in confidence. "This is sending a winter chill through the labour market. December saw the sharpest cuts to staffing levels since February. Some companies are acting now to restructure operations in advance of the rises in employer National Insurance and minimum wage levels in 2025."