Manufacturers’ exports declined at second-fastest rate in four and a half years in April

This article is more than 1 year old

This article is more than 1 year old

Fears over the threat of a disorderly Brexit lost UK companies new orders from international clients last month as factory exports plunged, according to a survey.

UK manufacturers’ exports declined at the second-fastest rate in four and a half years in April, amid a slowdown in factory output, the figures from IHS Markit and the Chartered Institute of Procurement and Supply (Cips) show.

The rush in stockpiling activity over recent months in the run-up to the original 29 March Brexit deadline, now delayed until October, also began to fade, paving the way for weaker economic growth after the race to build supplies of raw materials and finished goods at the start of the year.

UK factory export orders slide as Brexit scares overseas clients away - business live Read more

In a sign of the damage to the UK’s reputation for stability, the latest analysis suggested Brexit was the main reason for the slowdown, with fading demand from the EU, US and China. Weaker growth in the world economy also sapped orders from overseas clients.

Duncan Brock, group director at Cips, said: “As Brexit prevarication continued, overseas clients took to action and found new supply-chain routes away from the UK.

“The mild rise in domestic orders was unable to meet this significant shortfall in business, and with the extended Brexit deadline, the levels of stockpiling slowed.”

The reading on the IHS Markit/Cips manufacturing PMI – closely watched by the Treasury and the Bank of England for early warning signs from the UK economy – shows factory output eased in April.

The headline PMI index slipped to 53.1 last month from a 13-month high of 55.1 in March, when the stockpiling rush was in full swing. Anything above 50.0 separates expansion from contraction.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Factory output also eased in other countries at the start of 2019, including in the EU and China. Germany narrowly avoided recession at the end of last year, as weaker exports dragged Europe’s largest economy to stalling point. Growth in the eurozone has, however, staged a recovery since the start of the year.

Although there has been progress in recent months, trade tensions between the US and China have acted as a brake on the world economy as Donald Trump used higher tariffs to extract better trade terms from Beijing, while also threatening other major trading partners, including the EU.

The drop in factory output comes after Theresa May agreed to delay the Brexit deadline earlier this month. IHS Markit and Cips said the pace of stockpiling eased significantly last month from the record levels in March.

Economists forecast UK economic growth could slow over the coming months as companies run down their stocks built up over recent months, instead of placing new orders. However, one in five manufacturers still said they were storing up supplies amid the continuing lack of clarity over the UK’s future trading relationship with the EU.

Analysts said failure to resolve the Brexit impasse in parliament could lead overseas companies to continue sourcing their goods from other countries.

Francesco Arcangeli, economist at the manufacturers’ lobby group Make UK, said: “This slower output is also a reflection of increasingly weak demand and growing job losses.

“Demand from overseas has been hit particularly hard with several overseas customers reducing their British supply chains to divest themselves of their reliance on the UK market.”

Weaker economic growth and the linger uncertainty over Brexit is widely expected to prevent the Bank of England from raising interest rates on Thursday, when it releases its quarterly inflation report and the decision of its monetary policy committee.

The National Institute of Economic and Social Research expects that weaker levels of global demand and chronic political uncertainty at home will force the central bank to leave interest rates at 0.75% until mid-2020.