UK manufacturing activity likely to improve further in 2022
Written by Mr. Kunal Sawhney, CEO, Kalkine Media
The manufacturing activity in the United Kingdom is likely to ameliorate further in the present calendar year as the pandemic-related hardships subside over the coming months. The domestic market sentiments have continued to improve in the terminal quarter of 2021, even as the Omicron-led fears forced the government of the UK to reimpose mask mandates, alongside some precautionary measures to contain the rate of infection.
Though the measures taken by the Downing Street administration have failed to help in lowering the rate of infection as the country reported record surges in daily infections with the daily count nearing 200,000.
With the onset of the new calendar year, the manufacturers are anticipating a fresh bounce back in the orders as existing challenges including the faltering supply chain and logistics activity, and short-staffed operations are expected to moderate further in the present quarter. On the other hand, the problem of higher input prices may stretch up to the first half of 2022 as the Bank of England has already warned that the rate of consumer price based inflation will peak in April of this year.
Given the persistent business environment due to the rapidly spreading Omicron variant and towering increases in the total number of infections on a daily basis, the enterprises handholding the growth of manufacturing sector may get affected if the government proceeds ahead with another nation-wide lockdown or strict set of reciprocatory measures including heightened border control, curtailed domestic movement and limiting the operations of local enterprises that have driven the major rise in the footfalls in the recent past.
If the government manages to bring down the rate of infection with the present set of restrictions then the manufacturers can swiftly escalate the rate of production, as a result of which national economic output can witness sustainable upsurge.
In the month of December 2021, the rise in number of new orders, production levels, along with the employment activity, collectively steered an increase in the factory activity with the Manufacturing PMI rising to 57.9. According to the seasonally adjusted data provided by IHS Markit/CIPS, the PMI remained above the mark of 50.0 for the 19th straight months as the overall pace of expansion improved to a four-month high.
However, the comprehensive pace of expansion was disturbed by the untimeliness of orders due to malfunctioned logistics systems and industry-wide limitedness of skilled workforce. The considerable increase in the levels of manufacturing output was thoroughly supported by the domestic enterprises as market operations of local enterprises continued to improve. The cross-border hardships were there as the new orders from overseas locations dropped for the fourth straight month, continuing the negative trend for export businesses.
According to the survey, the manufacturers have complained about the possibilities of further pandemic-induced restrictions, persisting post-Brexit difficulties and logistics challenges. All these factors combined once again hit the demand from overseas markets at the end of 2021. Nonetheless, the demand for capital goods manufactured in the UK from the international markets jumped at the sharpest pace since August of 2021.
Continuing the trend of an upbeat job market in the UK, the employment in the manufacturing sector of the UK surged for the 12th consecutive month in December, effectively the whole 2021 contributed towards employment growth. Though the rate of jobs growth remained near the three-month high figure realised in November of 2021.
Despite the partial subduedness in the market due to the unfavourable business conditions on the back of Covid activity, the majority of manufacturing corporations have maintained a positive outlook in the terminal phase of 2021. Approximately 63% of the enterprises are anticipating the production levels to increase in the upcoming 12-month stretch, while a meagre 6% have projected a contraction in the present calendar year.
As the companies increasingly passed on the pressure of higher input prices to the consumers, the rate of increases in the factory-gate prices jumped to a new series-record high in December of 2021.
The inflationary hurdles are expected to subside by the end of H1 2022, as a consequence of which the upcoming policy actions by the Bank of England, alongside the commentary by the Federal Open Market Committee of the US Federal Reserve will be keenly watched by the corporations, as well as the investors.
The companies have also remained optimistic, as far as the pre-decided investment is concerned and the apparent hopes of less disruption due to Covid-19 pandemic (SARS-CoV-2) virus, the cumulative aftereffects of Brexit, supply chain troubles and other operative challenges.
