24 Jul 2024


Rising demand boosts output and jobs in UK industry

Improving domestic demand and rising levels of new business from abroad are helping UK manufacturers to continue their recovery, according to the latest Markit/CIPS Purchasing Managers Index (PMI). The January survey shows that companies have scaled up their output and taken on new staff to cope with the rising numbers of orders.

“UK manufacturing made a strong start to the new year, continuing the robust upsurge in production seen at the tail-end of 2013,” says Rob Dobson, senior economist at the survey compiler, Markit. “Although the pace of output expansion has cooled slightly in recent months, growth is still tracking at one of the highest rates in the 22-year survey history. The broad base of the upturn is remarkable, with its benefits being felt across all product categories, and at SMEs and large-scale producers alike.

“The domestic market remains the main pillar of the rebound,” he adds, “pushing the rate of expansion in total new orders back towards last November’s 19-year record. The long-awaited rebalancing of economic growth may also finally be within sight. Recent months have seen the largest surge in demand for UK investment goods for two decades, while new export orders are rising at one of the fastest rates ever recorded by the survey as global demand also undergoes a broad-based upswing.

“The latest survey provided good news on the jobs front as well,” Dobson continues, “with manufacturers adding to their payrolls at one the fastest clips seen for 2½ years. The ongoing improvement in the labour market in January adds further to the prospect of unemployment dropping below 7% imminently.”

“The continued improvement in global market conditions has ushered in a broad-based and fully-fledged recovery in manufacturing,” comments David Noble, CEO of the Chartered Institute of Purchasing & Supply. “Sustaining growth close to November’s near-record numbers, the makers’ march continued in January 2014, embodied by ever-faster rates of new business growth and ongoing increases in employment levels.

“Whilst domestic demand continues to climb, it is the expansion overseas that promises continued growth,” he adds. “The illusive export market has long been heralded as the key to unlock UK economic growth and in manufacturing appears to be coming to fruition, with new business rates climbing fastest in nearly three years.

“This has enabled firms, large and small, across the sector, to invest in staff, marking the ninth successive month-on-month increase in employment,” says Noble. “The rate of growth in jobs has also remained close to November’s 2½-year high. Whilst costs climbed yet again, firms were able to pass these on to customers, a further sign of bullishness across the sector.”

Commenting on the PMI data, Lee Hopley, chief economist at EEF, the manufacturers’ organisation, says that “manufacturers have begun the year in positive mood, maintaining the solid activity trends seen during the second half of last year. With separate data showing a further improvement in manufacturing activity across the eurozone, this supports our forecast for UK manufacturing output to grow by 2.7% this year – the fastest rate of expansion in four years.

“Some doubts will persist, however, over the durability of this upturn, given the ongoing weakness in investment spending and concerns over the impact of high energy costs across the sector,” Hopley cautions.