Production contracts for the first time in six months as new orders fall

British factory activity shrank last month due to a drop in new orders ahead of the Labor government’s first budget, data showed.

The S&P Global UK Manufacturing Purchasing Managers’ Index fell to 49.9 in October from 51.5 in September, the first time below 50 since April.

Any score above 50 indicates growth, while all numbers below that number indicate contraction.

While industrial production rose for the sixth month in a row, the PMI survey said output growth “nearly came to a standstill” due to weaker volumes of new work.

S&P blamed this on a ‘lack of market confidence’, slower economic growth and many domestic companies taking a ‘wait and see’ approach to pre-budget contracts.

Demand from both domestic and foreign customers was lower, with new export orders declining for thirty-three consecutive months.

However, input costs rose at the slowest pace in ten months, while the total number of production workers grew for the third time in four months.

S&P Global said the latter reflected increased production and efforts by companies to resolve labor issues, although it also noted that this growth was modest due to budget uncertainty.

Rob Dobson, director of S&P Global Market Intelligence, said: ‘UK manufacturing started the final quarter of the year on an uncertain footing amid speculation about government policy.

“The November PMI is particularly eagerly awaited as we will see the short-term impact of the budget on the business environment, and especially on confidence.”

Among the measures Chancellor Rachel Reeves announced on Wednesday were an increase in employer national insurance contributions to 15 percent and a 6.7 percent increase in the national living wage.

These two actions have raised major concerns that companies will cut jobs or be more reluctant to hire new staff.

The budget also included £975 million in research and development funding for the aerospace sector over five years and more than £2 billion to support the automotive industry.

Maddie Walker, Accenture’s Industry

“Investments in infrastructure and digital manufacturing technologies will be welcome news, and there is renewed vigor to explore how technology can solve productivity and profitability challenges.”