By Maximilian Clarke

Manufacturing output in the UK dipped again during November, marking a contraction for the vital sector.

The November Markit/ Chartered Institute for Purchasing and Supply Purchasing managers’ Index- the most comprehensive benchmark for industrial output- dipped still further to 47.6, where a figure below 50 marks contraction.

Commentators have attributed the decline to prolonged market insecurity in the eurozone, coupled with muted demand in the UK particularly as a result of cuts to public sector pay and employment insecurity.

But, commenting on the results, both Mark Lee, Head of Manufacturing at Barclays Corporate and the chief economist of the UK’s foremost manufacturers’ organisation say the figure is largely to be expected given the state of the broader economy, and that there is room for optimism despite the contraction.

Said Mark Lee: “With global manufacturing giants including Coca Cola and Toyota announcing major new investment in the UK this week, it is disappointing that the sector as a whole remains so subdued.

“This lack of confidence and the situation in Europe is now so entwined that despite some positive news for UK industry in the Chancellor’s Statement this week it is difficult to see the mood amongst manufacturers budging much. Until we see major contracts awarded to UK companies and new infrastructure projects underway, this is unlikely to change.”

Lee Hopley, Chief Economist, EEF, the manufacturers’ organisation observes anecdotal evidence that manufacturers are preparing for expansion into high-growth markets.
“There is not an encouraging number, suggesting more than a mere slowing in activity from this year’s earlier peaks,” said Ms Hopley.

“The main drag now appears to be on confidence across manufacturing as the economy is being buffeted by increasingly negative news and growing uncertainty in major markets.

“However, we should still be cautious in interpreting this as a widespread industry downturn, as recent data backed with anecdotal evidence still point to areas of growth and continued opportunities for expansion into new markets.”

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