Manufacturers feel supply chain pinch

1 min read

The rate of manufacturing growth has fallen for the fourth consecutive month, as a shortage of labour and the supply chain crisis begins to bite.

New figures from the IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) showed a September score of 57.1, down from 60.3 in August. Scores above 50 indicate an expansion of the manufacturing sector compared to the previous month.

According to the PMI, production schedules were disrupted by input shortages, longer supplier lead times and capacity constraints. Average vendor lead times increased amid reports of delays to air, land and sea freight, staff shortages at vendors, COVID-19 and Brexit disruptions, a lack of delivery drivers and port delays. New orders rose at the weakest pace since February, as intakes from domestic clients increased at a slower pace and new export work contracted for the first time in eight months.

Employment grew for the ninth consecutive month, but the rate of increase was the weakest since January. Jobs growth slowed at medium and large sized companies, while small manufacturers saw cuts for the first time in eight months. Where higher employment was recorded, this was generally to meet production requirements, combat rising backlogs of work and preparations for future growth.

Despite the September numbers, manufacturers maintained an overall positive outlook for the year ahead. Over 62 per cent of companies forecast their output would increase during the coming 12 months, compared to just six per cent expecting a contraction.

“While UK manufacturing output has slowed for the fourth consecutive month, it’s not yet triggering alarm bells with manufacturers showing healthy optimism to meet orders,” said Maddie Walker, Accenture’s Industry X lead in the UK. “We expect a slowdown to continue as manufacturers see no respite from supply chain gridlocks, restricted port capacity and workforce shortages.

“British businesses are improving their resilience by investing in areas such as automation and 5G connectivity, to streamline production processes and better connect their supply chains. Investment in new software and machinery, particularly with the UK’s roadmap in electric vehicle production, will likely kickstart greater demand for technology skills. A shift to software-based engineering will require manufacturers to develop and upskill their people or risk a severe skills shortage in the future.”