UK manufacturing downturn persists despite signs of improvement

In June 2023, the downturn in the UK manufacturing sector showed signs of easing as new data revealed an increase in the S&P Global UK manufacturing PMI survey. The PMI reading rose from 46.4 in May to 47.7 in June, indicating a slightly less severe contraction in manufacturing activity. According to the survey, this marks the strongest performance for the industry in five months, even as firms reported continued weak demand, which was attributed to uncertainty surrounding government policies, tariffs, and global economic conditions. Economic analysts noted that while any reading below 50 signifies a contraction, the July findings suggest that the decline in manufacturing may be stabilizing. However, the optimism is tinged with caution. Rob Dobson, director at S&P Global Market Intelligence, commented that market conditions remain fragile, suggesting potential risks to demand and a lack of reliable supply chains, which may affect future growth prospects. Despite the overall contraction in production, companies reported a slower decrease in new orders, indicating a possible uptick in future activity as they navigate through persistent challenges. Additionally, it was reported that new export business has been declining for an extended period, reaching its 41st month of deterioration. This decline has been linked to decreased demand from significant markets like the United States, Europe, and China. In light of these circumstances, Mike Thornton, head of industrials at RSM UK, highlighted an increase in the new orders index, which saw the most notable uptick since October 2024, contributing to improving industry optimism. He expressed hope that the newly formed trade deal between the US and UK could further support the manufacturing sector's recovery. Ultimately, while indicators suggest a shift towards stability in UK manufacturing activity, firms remain vigilant about numerous external factors that could continue influencing the market negatively.