Covid and Brexit have caused a drop in overseas demand for British manufactured goods with inflows of international orders down for the fourth month in a row.
The latest figures from IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) show growth in factory output was limited last month by Covid restrictions, while new post-Brexit rules have impacted export orders and pushed up costs.
However, the IHS Markit/CIPS manufacturing purchasing managers’ index (PMI) remained above the crucial 50 mark that signifies overall growth in the sector, scoring 57.9 in December, close to November’s three-month high of 58.1.
Demand affected
According to the Guardian, despite this growth and a slight easing of supply chain delays, manufacturers said logistics issues, Brexit difficulties and the possibility of further pandemic restrictions had damaged export demand.
Research by Euler Hermes said the requirement for firms to adjust to new rules and processes for trade with the EU will contribute to Britain’s economic recovery lagging European neighbours.
It says exports will not return to pre-pandemic levels until 2023. Germany and Italy’s exports recovered in 2021.
Disruption
Ana Boata, the head of economic research at Euler Hermes, said: “Our forecasts show that Brexiting in times of Covid-19 has hindered exporters’ capacity to benefit from the strong upswing in demand that lockdown has presented.”
Boata also said that the introduction of new border controls on UK imports at the start of 2022 is also likely to bring further disruption.
The Institute of Directors said its economic confidence index had fallen from -6 in November to -17 this month.
Specialty food imports
The Cold Chain Federation (CCF) has said speciality food imports from the EU could be particularly hard hit by the new rules.
Shane Brennan, the CCF chief executive, told the Guardian: “The big casualty of these trade barriers is the business that needs to import small and frequent quantities across borders – a pallet load of speciality cheeses or boxes of onion powder. This is the sort of trade that is going to suffer.”
Help
Businesses want more government help on issues such as trade, skills, finance and tax as they anticipate the next 20 years being more challenging than the last 20, according to a Lloyds Bank Business Barometer.
Almost half of respondents (48%) want new trade agreements to help mitigate these challenges, as well as support on tax (52%) and learning (44%).
Supply chain problems easing
In more positive news for businesses, fresh data from the New York Federal Reserve’s Global Supply Chain Pressure Index (GSCPI), reported in Reuters, suggests that global supply chain problems may have almost peaked.
The index is based on 27 variables including shipping rates and air freight costs between the US, Asia and Europe.
Researchers have found “enormous growth” in shipping costs since the beginning of the recovery but said that this rise has started to slow in recent months.
Fed officials are closely monitoring supply chain disruptions as they devise a plan for withdrawing financial support offered during the pandemic.