By Ravender Sembhy, Press Association City Editor
Manufacturers are stockpiling goods at the fastest rate since records began as they prepare for a hard Brexit and major disruption at ports, with a slowdown in the sector also expected to drag on Britain’s economic growth.
The Markit/CIPS UK manufacturing purchasing managers’ index (PMI) showed stock-building increased at the sharpest pace in the survey’s 27-year history last month.
Manufactures are bracing for supply-chain disruptions in the coming months if Britain crashes out of the EU without a deal, which is looking ever more likely.
The survey also showed that the growth of new order inflows slowed sharply and new export orders were near-stagnant as Brexit uncertainty reigns, contributing to a headline reading of 52.8 in January, lower than the 54.2 recorded in December.
It represents a three-month low and the second weakest reading since July 2016, the month after Britain voted to quit the EU.
Economists were expecting a reading of 53.5. A figure above 50 indicates growth.
Sterling dropped on the news, shedding 0.3% against the US dollar to hit 1.30. Versus the euro, the pound was down 1.13.
Rob Dobson, director at IHS Markit, which compiles the survey, said: “The start of 2019 saw UK manufacturers continue their preparations for Brexit. Stocks of inputs increased at the sharpest pace in the 27-year history, as buying activity was stepped up to mitigate against potential supply-chain disruptions in coming months.
“There were also signs that inventories of finished goods were being bolstered to ensure warehouses are well-stocked to meet ongoing contractual obligations.”
A host of companies including Tesco, Unilever and Marks & Spencer are among those hoarding goods as part of contingency planning, despite the Government having insisted that Brexit would see businesses and citizens retaining the “exact same benefits” of EU membership.
Mr Dobson said that, based on its historical relationship with official data, the lacklustre January survey results will “act as a drag” on the economy in the first quarter.
Samuel Tombs, chief UK economist at Pantheon, said: “Contingency planning for a no-deal Brexit is providing only limited support to manufacturers at a time of weakening underlying demand, both in the domestic and export markets.”