PMI: British factories shake off Plan B to clear swelling order backlog

British factories shook off the Omicron variant and Plan B to focus on clearing a swelling backlog of work, reveals a closely watched survey released today.

Business among UK manufacturers climbed at the fastest pace in half a year in January, driven by factories tackling mounting order books built up during 2021 when the trading environment was mired in Covid-19 disruption.

IHS Markit’s – the organisaiton who compiled the figures – latest purchasing managers’ index (PMI) inched down over the last month to 57.3, down from 57.9 in December.

Manufacturers rushed to snap up workers in a bid to expand production to tackle enormous backlogs of work.

Staffing levels jumped at the second steepest rate since IHS Markit started tracking the data 11 years ago.

Supply chain snarl ups, compounded by Covid-19 disruption and worker shortages have throttled manufacturers’ production, leaving them with a long list of orders to fulfill.

However, mounting costs for raw materials has squeezed manufacturers’ margins, prompting them to lift prices to protect profits.

As a result, demand for industrial output is cooling.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: “Signs have emerged this month, however, that rapid increases in output prices in the second half of 2021 have undermined demand.”

Factories are now holding off from raising prices further over fears it will crush orders, Dickens added.