'Severe' supply chain crisis cuts UK's manufacturing output

·2-min read
'Severe' supply chain crisis cuts UK's manufacturing output
Companies reported that some overseas clients were cancelling or postponing orders due to longer lead times caused by port delays and freight capacity issues. Photo:PA

The UK's manufacturing upturn lost speed as the fourth quarter began, as output growth was held back by rising supply chain disruption, staff shortages and declining intakes of new export work.

According to the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index, although the PMI was boosted by improved growth of new orders and employment, alongside a steeper rise in stocks of purchases and lengthier vendor lead times, a further slowdown in output growth held back growth. 

The index posted 57.8 in October, up from 57.1 in September, rising for the first time in five months.

Manufacturing production rose only marginally and at the slowest pace for eight months. 

New export business fell, albeit slightly, for the second successive month. Companies reported that some overseas clients were cancelling or postponing orders due to longer lead times caused by port delays and freight capacity issues. 

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The domestic market held up better in comparison, offsetting some of the weakness in overseas demand. 

Overall new order intakes rose at a slightly quicker pace, linked to economic growth and clients increasing or bringing forward purchases to avoid expected supply chain delays and further price rises in coming months. 

“Some manufacturers are safeguarding against global logistics challenges by bringing supply chains back to the UK. Yet it’s also an option more are likely to consider as customers increasingly examine the carbon impact of their supply chains, with shipping parts from all over the world becoming less palatable," said Dave Atkinson, SME & mid corporates head of manufacturing at Lloyds Bank.

"Scrutiny of sustainable practices is only likely to grow beyond COP26.”

Read more: European markets head higher amid 'moment of truth' at COP26

Meanwhile, jobs numbers remained strong. There was another rise for the tenth month in a row to meet increased demand, as the spotlight now shifts to the quality of workforces. 

"If businesses are forced to compromise on skills to get backlogged jobs out of the door, there may be further drags on delivery times and quality as business are spooked into making decisions just to adapt and survive," said Duncan Brock, group director at the Chartered Institute of Procurement & Supply.

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