What Led UK February Factory Output to Drop to Lowest Since May 2020?

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What Led UK February Factory Output to Drop to Lowest Since May 2020?

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 What Led UK February Factory Output to Drop to Lowest Since May 2020?

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Summary

  • The UK factories output growth in February was the slowest since May 2020.
  • Overall, complications due to the ongoing lockdown, Brexit, and shipping issues stilted growth.

 

The double whammy of the Covid-19 pandemic and Brexit have hit British manufacturers. The UK’s output growth in February was the slowest since May last year. The IHS Markit/CPIS Manufacturing Purchasing Manager’s Index dropped to 50.5 in February from 50.7 in January, the lowest output growth since May 2020. However, the larger manufacturing PMI came in at a two-month high of 55.1, against 54.1 in January. A score above 50 means growth in a sector, hence it can be called growth for the ninth month in a row.

Also read: Is the £5-bn scheme for high street recovery in Budget 2021 enough? 

IHS Markit said that companies reported better demand from markets like US, Asia, Scandinavia but also said that the impact of Covid-19 and Brexit-related complications and shipping issues affected growth in export order.

Britain imposed its third lockdown in January which completely shut down schools, restaurants, and all other non-essential businesses. To cope up with the devastation, Chancellor of the Exchequer Rishi Sunak had declared an extra £5 billion to support services firms and has also said that he would offer more as and when required.

Also read: UK economy contracts by 9.9% in 2020, largest-ever annual fall in GDP

 

                              

                                                                         

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As a result of Covid-related disruptions, the economy is expected to shrink sharply in early 2021. Economic output in December fell 6.5 per cent compared to a year ago and manufacturing fell 2.5 per cent. Revival of households would be crucial in how the economy comes out of the downturn. The Bank of England projected that January’s consumer borrowing dropped to 8.9 per cent, the biggest annual drop since 1994. This was due to withholding of spending on non-essentials. Retail sales data for January showed that purchases dropped by 8.2 percent.

In the first three months of 2021, the Bank of England has projected that the economy would shrink 4 per cent which would be a sharper fall than that seen during the 2008-09 financial crisis but lower than the 20 per cent fall seen in last spring.

Also read: Why Rishi Sunak Might Have to Hike Taxes To £60 Bn A Year

Rob Dobson, director at IHS Markit, said that beyond the headline PMI, the survey found almost halted production, shipping issues and delay at ports and confusion after the Brexit transition period ended.

Cost of materials increased at its fastest in four years and the time for delivery increased too. However, the confidence for the forthcoming year was at its highest in over six years, despite the post-Brexit custom laws that have increased the cost of doing business with the EU.

Now the 3 March budget is a keenly watched event to see whether the Boris Johnson government announces any aid to boost the manufacturing sector.

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