Supply chain breakdowns continue to drag on UK manufacturing

Supply chain breakdowns continue to drag the UK manufacturing industry down, but greenshoots of stronger growth are emerging.

Delays in deliveries for crucial materials, compounded by worker and skills shortages drove slower output growth among British manufacturing firms, a closely watched survey has found.

IHS Markit’s latest purchasing managers’ index for the UK manufacturing industry edged higher over the last month, rising to 57.8 in October, up from 57.1 in September.

Global supply chains have buckled under the weight of a resurgence in global demand triggered by economies around the world emerging from Covid-19 restrictions.

Suppliers are struggling to ramp up capacity in response to red hot demand, causing shortages of raw materials and fueling inflationary pressures.

Input costs climbed at one of the fastest paces in the survey’s history, prompting manufacturers to raise prices at the fastest paces on record.

The elevated inflation reading will pose headaches for the Bank of England, which publishes its latest decision on interest rates on Thursday. 

Financial markets expect the Old Lady to hike interest rates 15 basis points due to inflation becoming more embedded in the UK economy than previously thought.

“Companies reported that supply chain delays alongside shortages of raw materials, staff and certain skills had contributed to slower output growth,” IHS Markit said.

Despite the anaemic uptick in growth, it was the first time the PMI reading for the UK manufacturing industry had risen in five months, highlighting the headwinds the British economy has experienced recently after rebounding sharply from the pandemic.

Rob Dobson, director at IHS Markit, said: “Strained global supply chains are disrupting production schedules, while staff shortages and declining intakes of new export work are also stymieing the upturn.”