Manufacturing and construction growth slows, but rebound in UK service sector

The latest Markit/CIPS manufacturing purchasing managers’ index (PMI) has recorded a score of 54.2, down from 54.5 and below City forecasts of 55. The report does however also show that optimism among manufacturers has reached a ten-month high as the weak pound boosts demand for British-made goods overseas.

Lee Hopley, Chief Economist at manufacturing organisation EEF, said the PMI score could indicate how the wider economy will perform over the coming year as rising prices and shrinking real incomes prompt a consumer-driven deceleration.

The IHS Markit PMI showed that construction output in the UK expanded in March at its slowest pace since September. The PMI slowed to 52.2, down from 52.5 in February. The development was attributed to weaker house price growth denting demand for new properties and forcing the construction boom to slow down, after a strong period of growth in the past six months.

Civil engineering projects are racing ahead, however, as businesses invest more because their confidence has returned following the post-EU referendum dip. Rising infrastructure spending also gave the sector a boost.

Markit/CIPS UK Services PMI shows the strongest rise in service sector activity so far in 2017. The headline seasonally adjusted Markit/CIPS Services PMI Business Activity Index picked up from 53.3 in February to 55.0 in March, and therefore above the 50.0 no-change value for the eighth consecutive month.

Business activity growth hit a three-month high in March, new work increased at a strong pace, but job creation slowed. Survey respondents also remained optimistic about the year-ahead business outlook, with almost half of the survey panel forecasting growth while only one-in-nine expect a fall in activity. However, intense cost pressures continued in March, which led to the fastest rise in prices charged by service sector firms since September 2008.

Looking ahead
In this volatile economic landscape, it is essential that UK SME business owners maintain effective management of their company’s working capital and put processes in place to survive and thrive in challenging times.

Contact our specialist advisers at Beavis Morgan for guidance and strategic advice to help in formulating plans for your business in order to strengthen its prospects of success, achieve growth and maximise wealth. Our partner business, BM Structured Finance, is also available to help with sourcing and restructuring debt finance for SME businesses.

For further information, contact Steve Govey or your usual Beavis Morgan Partner.