UK manufacturing growth slows as output, new orders and employment rise at weaker rates.
Growth in the UK manufacturing sector eased during May, as rates of expansion in output, new orders and employment all decelerated. The slowdown was driven by weaker growth of domestic demand, lower intakes of new export work and ongoing disruption caused by stretched supply chains, rising cost pressures and the war in Ukraine.
The seasonally adjusted S&P Global / CIPS UK Manufacturing Purchasing Managers’ Index® (PMI®) posted 54.6 in May, unchanged from the earlier flash estimate and down from 55.8 in April. The PMI – which is calculated from five subindices – has remained above the neutral 50.0 mark for 24 months.
Manufacturing output increased at the slowest pace since October 2021. The performance of the consumer goods industry was especially weak, with production falling for the first time in 15 months. Growth slowed at intermediate goods producers but accelerated in the investment goods category.
May saw the weakest increase in new work received during the current 16-month sequence of expansion. Supply chain issues, subdued client confidence, signs of economic slowdown and reduced export order intakes all stymied new order growth.
New orders declined in both the consumer and intermediate goods sectors. The downturn in the former also reflected the impact on consumer demand of the current cost of living crisis. Investment goods producers saw new work intakes rise at a quicker pace. May saw new export orders decline for the eighth time in the past nine months. Companies attributed lower inflows of new work from overseas to Brexit difficulties, transportation delays, shipping disruptions and the loss of orders due to the war in Ukraine.
Weaker growth of new orders led to reduced backlogs of work and increased holdings of finished goods inventory. Stock levels rose due to intentional replenishment and delays in the despatch of finished goods to clients.
Stretched global supply chains and the associated scarcity of certain inputs also contributed to input price increases and rising levels of purchasing to build-up safety stocks.
Input cost inflation stayed substantial in May, easing from April’s near-survey record high. Chemicals, energy, food, freight, fuels, gas, metals, oil, plastics, polymers, timber, and transportation (air, land and sea) were all reported as being up in price. China lockdowns, exchange rate factors, sanctions on Russia, the war in Ukraine, supply chain disruption and raw material scarcity also drove up purchasing costs.
Part of the increase in input costs was passed on to clients in May. Selling prices rose at a rate close to April’s survey record high. The increase was linked to inflationary pressures, material shortages and rising labour and energy costs.
Input buying activity rose for the sixteenth consecutive month in May, while stocks of purchased goods rose at the quickest pace in three months. Rising demand for materials combined with stretched global supply chains led to longer delivery times from vendors. That said, lead times increased to the weakest extent in over a year-and-a-half, suggesting that the pressure on supply chains was past its peak.
UK manufacturing employment rose for the seventeenth successive month in May, albeit at the slowest pace since last October. The outlook for the sector remained positive, with 55% of manufacturers expecting output to rise over the coming year.
However, confidence slipped to a 17-month low, amid fears of a possible global recession, rising cost pressures and stretched world supply chains.
The National Manufacturing Institute Scotland (NMIS) Group, operated by the University of Strathclyde, has announced that it will open a new technology centre in Ayrshire in partnership with North Ayrshire Council and deep tech innovation organisation, CPI, to help the country’s process manufacturing industries embrace emerging technologies and fast track a net-zero future.
Targeting process industries including Scotland’s £9 billion oil and gas, £15 billion food and drink and thriving pharmaceutical and chemical sciences industries, the new Digital Process Manufacturing Centre (DMPC) located at i3 in North Ayrshire will offer training opportunities, cutting-edge digital demonstrators and access to expert support on research and development (R&D).
The news follows last year’s announcement that the University of Strathclyde was set to work in partnership with North Ayrshire Council and CPI committing to future proofing the process industries through support for digitalisation and data-driven manufacturing.
Following the successful delivery of a series of specialist courses through the NMIS Manufacturing Skills Academy, the partners are now ramping up support through the new centre, which will be housed in an existing manufacturing facility after it undergoes a half million-pound refurbishment. The centre is set to open its doors later this year.
Including space for industrial engagement and a digital demonstration laboratory, the DPMC will provide hands on experience of industry 4.0 technologies across the pharmaceuticals, oil and gas, food and drink, chemicals, water, and fast-moving commercial goods industries, initially supported by a team of six NMIS engineers and researchers.
It will be the first time the Scottish Government backed NMIS Group has opened a centre outside of Renfrewshire’s Advanced Manufacturing Innovation District Scotland (AMIDS) where it operates out of the University of Strathclyde’s Advanced Forming Research Centre (AFRC) and Lightweight Manufacturing Centre (LMC) and will soon open its new headquarters.
NMIS leads ground-breaking manufacturing research to transform productivity levels and boost workforce skills, working with companies of all sizes from growing local firms to manufacturing giants including Boeing.
CPI, collaborates with partners in industry, academia, government, and the investment community to accelerate the development and commercialisation of innovative products in healthcare and sustainability.
Marking the first time that High Value Manufacturing (HVM) Catapult centres NMIS and CPI have joined forces to open a centre, the DPMC will provide unrivalled cross-industry and academic expertise to businesses across Scotland and beyond at a critical time for manufacturers looking to become more sustainable and mitigate historically high energy costs.
The DPMC will be funded by the Ayrshire Growth Deal, Scottish Enterprise, University of Strathclyde and CPI, and will be supported by ongoing membership income. Currently home to Booth Welsh, GSK, DSM, and Merck Group, the Ayrshire region is undergoing a rapid industrial transformation, benefitting from a funding injection of up to £21 million from the Ayrshire Growth Deal to create the i3 Digital Innovation Campus and Low Carbon Business Park in Irvine.
A new Centre of Excellence is also being developed in Kilmarnock as part of the Ayrshire Manufacturing Investment Corridor (AMIC) project that will provide onsite support and start-up units to create and grow local food and drink businesses, and complement support offered by the DPMC.
Keith Ridgway, Executive Chair, National Manufacturing Institute Scotland, said: “At the National Manufacturing Institute Scotland, we’re re-establishing Scotland as a manufacturing powerhouse and doing it proudly as part of the High Value Manufacturing Catapult family. Working closely with our Catapult colleagues at CPI, we’re leveraging our combined experience, expertise and networks to deliver powerful solutions for industry.
“Opening our first centre outside of Renfrewshire also demonstrates that we are here to support manufacturers, wherever they are. From fish processing factories in Peterhead looking to become more resource efficient and cut costs, to Ayrshire pharmaceuticals businesses that want to explore data control and analytics to become more competitive, the Digital Process Manufacturing Centre (DPMC) can help.
“We’re delighted to be joining forces North Ayrshire Council on this vital new offering for the process industries.”
The UK lost 170,000 manufacturing jobs during the pandemic, GMB analysis shows.
The damning statistics are revealed alongside GMB’s Annual Congress, which took place in Harrogate on the 13th June.
They show 170,400 jobs in the sector disappeared between 2019 and 2021, a fall of almost 6 per cent in just two years.
In 2019, the UK supported 2.9 million permanent and temporary manufacturing jobs. By the start of this year, the had fallen to 2.7 million.
Every region and nation in the UK has experienced a decline in manufacturing employment.
The worst affected region by total job losses – the East Midlands – lost more than 31,000 manufacturing jobs. This was a loss of one in ten manufacturing jobs in the region.
Charlotte Childs, GMB National Officer, said:
“Almost 200,000 jobs manufacturing jobs lost during the pandemic is devastating for communities. Unless Ministers address this urgently there could be worse to come.”
“The race to net zero could revolutionise UK manufacturing; tens of thousands of new, green jobs in wind, solar, nuclear, and more. Instead, this Government seems determined to let them all disappear overseas.”