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UK manufacturing starts to slow from price pressures

Published: Friday 02 February 2018

While the UK manufacturing sector is still growing, the rate of growth has slowed at the start of 2018, as cost pressures return. January’s Manufacturing Purchasing Managers’ Index (PMI), showed a drop from December’s 56.2 figure to 55.3. Any figure above 50 represents growth, and 55.3 remains well above average as solid growth continues across the sector, but as inflationary pressure builds, UK manufacturers have been unable to maintain previous highs in new orders and output. 
By Halo Financial Team
Output and new orders still on the up

Output continued to grow, although at the slowest pace for some six months. Increasing new orders as strong demand continues from the UK and overseas means greater production for the sector, again at a slower pace than before. Consumer, investment and intermediate goods all saw strong growth in new orders and output, particularly in the investment goods sector.

Exports increase at fastest for four years

Export orders have grown and demand has increased the fastest for four years –sales have increased to the USA and Canada, Europe, China, Japan and the Middle East.

The increase in new business has, in turn, led to a significant expansion of cost pressures, as greater demand pushed pricing power to suppliers and created shortages of raw materials.

Purchase prices have shot up the quickest for almost a year and the significant increase marks the highest throughout the time of the PMI survey. Supplier delivery times have also grown considerably.

David Johnson, founding director of Halo Financial, observed,
“The latest survey reports that some manufacturers are bringing purchases forward to reduce the risk of additional rises in costs and prices and reduce delivery delays. The same approach can also be taken on the currency side with any international transactions. With currency markets increasingly volatile and the Pound currently taking a turn upwards, further contributing to cost pressures, it’s an important time to assess the company’s exposure to currency risk against rising costs and make plans to mitigate the impact of future movement.”

“Despite these challenges for the UK manufacturing industry, it is encouraging to see that the overall picture is still one of growth and robust demand, particularly when it comes to exports. Companies must now take the steps needed to protect this.”

Atul Kariya, manufacturing sector head at business advisors and accountants, MHA MacIntyre Hudson, said, “We warned of increasing cost pressures and their implications for the industry throughout 2017, and while the industry saw some respite towards the end of the year, inflationary pressures have returned with a vengeance. It’s critical that firms now build contingency plans in for the year ahead”

Laurence Gavin, partner at Irwin Mitchell, commented,
“December was another solid month for the sector and it was particularly pleasing to see employment levels increase. Manufacturers need to build on this into 2018 and despite the on-going political uncertainty, many will be looking for a strong start supported by continued export growth.”

About Halo Financial


Halo Financial is a leading UK foreign exchange brokerage, offering a comprehensive range of services to individuals and businesses since its inception in 2005. The business prides itself on offering a flexible and personalised approach for each of its clients, simplifying the seemingly complex foreign exchange market to maximise savings in currency transactions, protect against currency risk and make money go further.
Staffed by qualified technical analysts, the company is authorised by the Financial Conduct Authority and HM Revenue and Customs.

“Excellent”, “Reliable”, “Professional”, “Knowledgeable”, and “Helpful”– just some of the great feedback received as a Gold Trusted Service Provider for Feefo.com. The team at Halo are proud that customers rate their services so highly and are happy to recommend to others. The company is always striving to provide the best possible service and to innovate services and products in line with customers’ ever-evolving needs.

Halo Financial won Best Customer Focus category in the 2016 Best Business Awards; received OPP Gold for Best Supporting Service; the Gold Award for Financial Support and Innovation from Relocate Magazine, Commendations in the 2016 and 2017 Moneyfacts Awards and has 5 out 5 Star Customer Gold Merchant Status via independent review website, Feefo.com, winning their Gold Trusted Service award.

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