UK manufacturers buoyed by Brexit stockpiling as eurozone slumps | Business

Panic stockpiling by manufacturers before a possible no-deal Brexit sent activity in the sector surging to a 13-month high in March, according to a survey.

Firms hoarded raw materials and finished goods at the fastest monthly rate of any G7 country since 1992 amid concerns that imports and exports would be held up at the UK border.

The IHS Markit purchasing managers’ index (PMI) jumped to 55.1, the highest since February last year, with output, employment and new orders rising at increased rates as manufacturers and their clients raced to cram “buffer stocks” into their warehouses.

The rise in UK output contrasted with a miserable month across the eurozone, which remained mired in recession after conditions deteriorated at the fastest rate in six years.

Germany dragged down the eurozone PMI after falling to 44.1, an 80-month low. Italy also fell, along with France, which hovered around the 50 mark that separates contraction from expansion.

UK and Eurozone output

The only optimistic note for European manufacturers was a surprise increase in China’s output, which pushed the PMI for the world’s second largest economy to 50.8.

Shares in London-listed mining companies nudged higher on the news and metal trading firm Glencore also benefited, while in Frankfurt the DAX rose 1.16% as traders became more optimistic about the sales of German cars and industrial equipment to China.

The UK car manufacturing industry has also been hit by flagging sales to China.

Earlier this month, car firms said their anxiety over Brexit was “at fever pitch” after monthly production figures showed a 15% year-on-year drop in output in February – the ninth consecutive month in which British car manufacturing output has fallen.

Rob Dobson, a director at IHS Markit, said the jump in UK manufacturing activity was directly linked to firms stepping up their preparations for potential Brexit-related disruptions.

But he warned: “The stock-building boost introduces a major headwind for demand, output and jobs growth moving forward. Manufacturers are already reporting concerns that future trends could be constrained as inventory positions across the economy are unwound.

“The survey is also picking up signs that EU companies are switching away from sourcing inputs from UK firms as Brexit approaches. It looks as if the impact of Brexit preparations, and any missed opportunities and investments during this sustained period of uncertainty, will reverberate through the manufacturing sector for some time to come.”

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The consultancy Capital Economics said its analysts were more circumspect about the impact of stockpiling.

It said: “We would warn against concluding that stock building is significantly supporting overall economic growth given there is little evidence of that in other figures such as imports. And even if it was, it would only be a temporary boost to activity.

“Nonetheless, considering the industrial contraction in the eurozone, UK manufacturing appears to be coping well.”

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