UK manufacturing orders for the first quarter of this year grew at their weakest rate since Q2 2016, even though the number of UK manufacturers hit a record high, according to a new study.
Lloyds Bank’s International Trade Index, compiled in partnership with IHS Markit, posted a reading of 50.4 for new manufacturing exports for the first three months of 2019, down from 50.8 in Q4 2018. A reading of above 50 indicates growth, while one below 50 signifies contraction. But despite sluggish growth, more UK manufacturers are exporting than have done for the last 14 years, at 81.3% of firms participating in IHS Markit’s purchasing managers (PMI) survey.
Gwynne Master, managing director and global head of trade for Lloyds Bank global transaction banking, says: “In the midst of a testing climate, British companies are demonstrating undeniable resilience. The proportion of UK manufacturers trading overseas is at its highest level since 2005 and some subcategories of UK exports, including consumer goods and the technology services sector, are performing particularly well.”
But it’s a mixed picture across different industry segments. While the read-out for textiles and clothing on the trade index was 63.1, the highest reading since 1997 and up from 55.4 in Q4 2018, new export orders for intermediary goods contracted to 47.1.
Lloyds attributes the UK’s slumping export growth in large part to the global economic slowdown, with the index showing overall international demand for British goods and services in Q1 2019 at 52.5, down from 53.1 in Q4 2018, as subdued growth in China and soft demand in markets such as France and Ireland started to bite.
As ever, Brexit takes its share of the blame, with the report finding that the UK’s looming exit from the EU has caused its manufacturing sector to stockpile at the highest rate in 27 years, locking up higher amounts of working capital and consuming cash that could be better spent on accessing new markets and building new capacity.
Another study, also out today, underscores the impact of the imminent British departure from the continental bloc on UK exporters. About a third of respondents to the latest edition of the Santander Trade Barometer reported diminished business confidence as a result of concerns about supply chain links to EU countries, reduced trade with the EU and tariffs on EU sales. Uncertainty over tariffs post-Brexit is also plaguing those businesses that don’t yet trade internationally but are about to start doing so over the next 12 months, the survey said.
Their worries may not be unfounded: recent findings from a survey of 1,749 supply chain managers from the UK and EU by the Chartered Institute of Procurement & Supply (CIPS) last month showed British exporters face losing contracts, being forced to slash prices or denied payment if Brexit causes delays to deliveries of goods.
Despite these latest less-than-rosy stats, John Carrol, head of international and transactional banking at Santander UK, says that it is important that businesses “don’t lose sight of the huge potential offered by international markets to bolster their growth when faced with unpredictability at home” – a view shared by the UK’s trade commissioners, who recently outlined the many and varied ways in which British exporters can keep on keeping on, despite what increasingly look like insurmountable challenges.