UK manufacturing sector still in decline as Red Sea disruption adds to woes

01 February 2024 , 11:40

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UK manufacturing sector is still in decline as Red Sea disruption continues (Image: PA Archive/PA Images)

UK manufacturing is still on the decline, with disruptions in the Red Sea causing further issues for supply chains.

A new survey reveals that rerouted deliveries due to these troubles have added to the ongoing difficulties. The S&P Global/CIPS UK manufacturing PMI survey showed a slight increase to 47 in January from 46.2 in December, indicating a minor reduction in the sector's decline.

However, the figure remains below the 50.0 threshold, signalling that the sector is still shrinking. Rob Dobson, director at S&P Global Market Intelligence, commented: "The downturn in UK manufacturing continued at the start of 2024, with output, new orders and employment all reduced in January."

He also noted that this contraction was widespread across consumer, intermediate and investment goods sub-industries. Manufacturers are becoming increasingly cost-cautious due to this ongoing weakness, leading to cutbacks in purchasing and stock holdings as companies aim to protect cash flow and defend fragile margins.

The latest data revealed that manufacturing production fell for the 11th consecutive month in January. Companies linked this drop to "weaker" levels of new work, efforts to reduce their inventories and disruption caused by supply chain delays.

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Shipping routes through the Red Sea to the Suez Canal are causing delays. Big shipping companies have had to take longer paths around Africa because of attacks, making journeys up to two weeks longer.

Glynn Bellamy from KPMG said: "While the headline figure shows monthly improvement for the UK manufacturing sector, domestic and international challenges remain, including the developing supply chain impact from shipping disruption in the Red Sea. Ocean freight costs have risen, as have supplier delivery times, contributing to increasing costs and slowing production for the manufacturing sector."

"This threatens to reverse the recent good news story of falling inflation and once again brings supply chain resilience into focus and the mitigation of risks from extended global supply chains in a world of increasing geopolitical uncertainty."

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Lawrence Matheson