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The push-pull of recovery

04 August 2021

THE LATEST UK Manufacturing PMI shows that, while rates of expansion in output and new orders have slowed from June, July has seen the upturn continue with robust sales to both domestic and export clients.

The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index posted 60.4 in July, down from 63.9 in June and even further from May's record high of 65.6. However, the PMI has signalled expansion for 14 months, and manufacturing production rose for the fourteenth consecutive month in July, as companies benefited from increased new order intakes, rising client confidence and the re-opening of the economy. New business inflows reflected stronger demand from domestic and overseas markets.

That said, rates of growth in both output and new work both eased to four-month lows, with growth slowing across the consumer, intermediate and investment goods industries. So why such mixed reports?

Well, you only have to glance at the news to realise that the UK is experiencing supply chain issues - and it’s not just the supermarkets that are feeling the pinch. The figures show that logistic delays caused by stretched international supply chains led to a further marked lengthening of supplier lead times during July. Raw material shortages, disruption caused by COVID-19 and Brexit and capacity issues across the distribution network (including delays at ports, freight and shipping services) have all contributed to delivery delays.

With demand outstripping supply, price pressures continued to grow during July. Average input costs rose at a near survey-record pace, with over 72% of manufacturers seeing an increase. A vast array of items increased in cost, including chemicals, commodities, cardboard, electronics, foodstuffs, metals, packaging and timber products. The pass-through of higher input costs led to a further substantial rise in output charges, which rose at a near-identical pace to June's record figures.

Increased demand for labour as the economy opens up, Brexit, pandemic-related uncertainty and the furlough scheme have all impacted the number of jobseekers available

And then there is the matter of skills/labour shortages. Increased demand for labour as the economy opens up, Brexit, pandemic-related uncertainty and the furlough scheme (at the end of June around 1.5 million workers were still furloughed) have all impacted the number of jobseekers available. This has been compounded by the so-called ‘pingdemic’ which has seen swaths of workers self-isolating.

Addressing the issue, Make UK is urging the government to bring forward the 16 August date that will see an end to self-isolation for those fully vaccinated. The call was made on the back of a survey, which shows two-thirds of companies back the call in response to the widespread impact of an increasing number of staff who are having to isolate. This is having a knock-on impact with 13% of companies saying some production had already stopped.

The survey of 436 companies also showed companies continuing to prioritise the safety of their staff with more than two-thirds of companies (67%) saying they had not removed any restrictions and had no plans to do so. Almost a fifth of companies (19%) have removed some restrictions, while just 2% have removed all.

The survey also showed that the overwhelming majority of companies (97%) back free lateral flow tests for employers and statutory sick pay from day one for employees isolating and/or with Covid symptoms.