‘Stagflation’ fears mount as UK manufacturing hit by shortages

Chronic shortages of materials caused by supply chains buckling under the weight of a resurgence in global demand are intensifying the spectre of “stagflation” looming over the UK economy.

A sharp slowdown in growth in Britain’s manufacturing industry has prompted Rob Dobson, director at IHS Markit, a producer of a closely watched economic survey, to warn “the UK [is] descending towards a bout of ‘stagflation’.”

“Production growth is severely impacted by the ongoing strain across supply chains and, with demand far exceeding supply, the inevitable result has been higher prices, which will ultimately hurt the pockets of consumers,” he said.

IHS Markit and CIPS’ manufacturing purchasing managers’ index fell to 57.1 in September, its lowest reading since February and the seventh successive month of a slowing growth rate.

Delays in deliveries of materials used to manufacture goods extended at one of the fastest paces in the survey’s history, driven by supply chains breaking down due to a lack of workers and ongoing Brexit and Covid-19 related disruption.

Martin Beck, chief economic advisor to the EY Item Club, said: “Though some of the bottlenecks should soon start to ease, many sectors – most notably those requiring semiconductors – are likely to face disruption for much of 2022.”

“This signals activity is likely to remain constrained for some time to come, while global goods prices will climb further, adding to the variety of upward pressures on inflation in the short-term.”