Pre and post EU referendum uncertainty fuelled a PMI of just 48.2 for July. This marks only the second time in three years the PMI barometer has failed to hit the 50 benchmark indicative of growth.
Data showed production decline at its steepest rate since 2012 with contractions across the consumer, intermediate and investment goods sectors.
Soaring purchase price costs cancelled out anticipated export gains from a weakened pound, the data also revealed.
Rob Dawson, senior economist at Markit, commented: “The drops in output, new orders and employment were all steeper than flash estimates... the improvement in exports was less marked than previously estimated, blamed in part on sluggish overseas demand. The downside of the currency was an upsurge in input price inflation to a five-year high on the back of rising import costs.”
And weak order books and declining volumes among the 600 firms responding indicated worse was still to come, warned Markit/CIPS.
Dawson urged immediate government action to arrest the decline. He said: “The weak numbers provide powerful arguments for swift policy action to avert the downturn becoming more embedded and help to hopefully play a part in restoring confidence and driving a swift recovery.”
Dawson’s bleak assessment was echoed by banking chiefs.
Mike Rigby, head of manufacturing at Barclays said: “These disappointing figures would indicate that the uncertainty deterring manufacturers from making vital investment decisions prior to the EU referendum has taken a stranglehold since the vote and we can expect to see businesses continuing to protect cash and guard investment.”
Dave Atkinson, head of manufacturing at Lloyds Bank Commercial Banking, added: “It will come as no surprise that manufacturers have put growth plans on hold following the vote to leave the EU, as firms watch closely to see how the landscape could change in the coming months”.
“Manufacturing has never been more important to the success and growth of the British economy, and the potential development of an industrial strategy could prove significant in providing additional support to the supply chain.”
