Economic activity declines again as manufacturing sector hit by worst supply chain problems since the 90’s – but there are signs of better times coming
- Shipping delays, Brexit and demand for worldwide materials hit supply chains
- But, manufacturing sector still showed signs of growth last month
Severe supply chain disruption hampered the manufacturing sector’s performance last month, the results of a closely-watched survey have revealed.
Supply chain disruption problems were the worst since the 1990s in January this year, and only fractionally better than at the height of the pandemic in April 2020.
While the manufacturing sector still enjoyed a degree of growth last month, international shipping delays, strong worldwide demand for raw materials and Brexit-related trade frictions all took their took.
Britain’s economy continued to falter in the first two weeks of February, but the speed of the falls slowed compared with a significant slump in January, according to new data.
Trouble: Supply chain disruption problems were the worst since the 1990s in January this year
The IHS Markit/CIPS Flash UK Composite PMI report came in at 49.8, with anything below 50 seen as a market in contraction.
This improved from January’s figure of 41.2.
The manufacturing sector recorded a flash PMI of 54.1 as new orders rose, although exports remain troublesome with many reporting difficulties fulfilling orders to existing clients in the EU due to higher costs and transportation delays.
The services sector continues to struggle as Covid-19 lockdowns and restrictions remain. It recorded a PMI of 49.7 compared with 39.5 in January.
But overall, the flash data for February, which comprises 85 per cent of expected respondents for the final number released next month, showed only a marginal drop in private sector output compared with heavy falls in January.
In the manufacturing sector the output index grew slightly to record a score of 50.5, but the rate of growth was the weakest since June 2020.
Results: Output by different business sectors across the UK, according to IHS Markit
Trouble: A chart showing supplier delivery times since back in 1992
Output: A chart showing output and GDP levels since 2007
The delays at ports and in global supply chains saw 58 per cent of those surveyed report longer delivery times from suppliers, with just 2 per cent revealing an improvement.
Services continue to drag down the overall score with tight restrictions on travel, leisure and hospitality remaining in place.
But, staffing levels in the sector showed signs of stabilisation, the survey found, with the level of job losses slowing compared with January.
Some manufacturers also reported that their own sales volumes have fallen due to the closures in hospitality, meaning the lockdown is having a knock-on effect.
Data also showed a slight reduction in the total new work received by businesses – for the fifth consecutive month and export sales underperformed domestic orders for the first time since last September.
Chris Williamson, chief business economist at IHS Markit, said: ‘The UK economy showed welcome signs of steadying in February after the severe slump seen in January, albeit with business activity remaining sharply lower than late-last year due mainly to the ongoing national lockdown.
‘Although the hospitality sector, including hotels and restaurants, reported a further steep decline, as did the transport and travel sector, rates of contraction eased considerably.”
Duncan Brock, group director at CIPS, added: ‘February saw some of the worst supply chain disruptions since records began in the early 1990s, only surpassed by those reported in April last year as the pandemic first hit.
‘Manufacturers were affected the most, as production in some cases was halted due to shortages in shipping and raw materials and many services businesses remained in a lockdown stranglehold unable to operate.’
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