UK factory activity shrinks for first time since April

Activity in the UK’s manufacturing sector contracted last month for the first time since April following a drop in new orders, according to new data.

The closely watched S&P Global UK manufacturing PMI survey recorded a reading of 49.9 for October, down from 51.5 in the previous month.

Any reading above 50 means a sector is in growth while a score below this means it is shrinking.

The latest reading was lower-than-expected, with a consensus of analysts having forecast 50.3 for the month.

The survey found that some firms held off investment amid a “wait-and-see approach” ahead of the Government’s Budget announcement on October 30.

New orders decreased for the first time since April on the back of a “lack of market confidence”, as some domestic clients sought more clarity about how budget policies could impact their operations or spending plans.

Demand was weaker from both domestic and export clients, with export orders falling for the 33rd consecutive month.

Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing started the final quarter of the year on an uncertain footing amid speculation on Government policies ahead of the Budget, which was widely reported to have led to a wait-and-see approach on investment and spending.

“This domestic headwind, combined with an ongoing loss of export business, led to the first outright contraction in new work intakes since April.

“Output growth came close to stalling as a result.

“The generally lacklustre environment was also reflected in the headline PMI slipping below its neutral 50.0 mark and business optimism hovering only slightly above September’s nine-month low.”

The survey found that manufacturing employment increased for the third time in four months and companies said they hired more workers to help clear up backlogs of work.

Christine Hart, legal director in the manufacturing and supply team at Brabners, said: “It’s a shame to see the strong growth of the manufacturing sector over the last five months falter.

“This contraction reflects wider uncertainty that swelled in the run up to the Autumn Budget and was compounded by a weaker month for export-heavy sectors, like new car manufacturing.”