UK manufacturers ramp-up job cuts despite post-lockdown rebound in production

Manufacturing employment slumped ‘at one of the steepest rates during the past 11 years’, with small, medium and large-sized firms all reducing staff numbers

UK manufacturers ramped up job cuts in August despite reporting the fastest growth in output for more than six years.

Businesses reduced headcount for the seventh successive month, even as many fired up production lines after lockdown restrictions eased, according to IHS Markit’s purchasing managers’ index (PMI) survey.

Manufacturing employment slumped “at one of the steepest rates during the past 11 years”, with small, medium and large-sized firms all implementing cuts, the report said.

The poll asks managers about jobs, order numbers, production volumes and future prospects. It is seen as a useful early indicator of performance.

August’s manufacturing PMI came in at 55.2, up from 53.3 in July, with anything above 50 indicating expansion compared to the month before.

However, while the index is comfortably into positive territory, growth has come from a low base during March, April and early May, when many businesses were shut down to halt the spread of Covid-19.

David Atkinson, a regional director at Lloyds Bank, said pain was being felt more acutely in some parts of the sector than others.

“Food producers supplying grocers are still reporting strong sales, but the boost they enjoyed in lockdown appears to be wearing off as consumers return to more normal shopping habits,” he said.

“Unfortunately, there is no escaping the fact that aerospace and automotive – two of the UK’s most important manufacturing industries – have been severely weakened by the pandemic, affecting both the larger groups and their supply chains. It may be years before they recover the lost ground.”

Rob Dobson, director at IHS Markit, said the survey indicated that business optimism was “encouragingly robust” and close to July’s recent peak.

“The recovery of the UK manufacturing sector gathered pace in August,” he added.

“Output expanded at the fastest rate in over six years as new work intakes rose to the greatest extent since November 2017, led by an upturn in domestic demand and signs of recovering exports.”

Manufacturers reported export growth after improved demand from Europe and the Middle East, North America and Australia.

Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said: “It seems the sector may be experiencing a V-shaped recovery with the fastest rate of growth in the manufacturing sector since May 2014.

“However, amidst this positivity, the elephant in the room remains the poor employment figures.

“The drop in job numbers in August makes this feel more of a rebalancing strategy than real recovery.”