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Updated 02:56 27/06/19

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Pound falls further as UK manufacturing slump risks recession


Liam Sheasby

Liam Sheasby, News Editor
1 Feb 2019, 11:41 a.m.


The Pound Sterling has fallen back below $1.31 today following the latest manufacturing figures from IHS Markit. The 0.3% drop against the Dollar was accompanied by a 0.5% drop against the Euro, with Sterling now at €1.1399.

As a result of the Pound’s value dropping, the price of gold has risen above £1,010 per ounce – currently at £1,011.39. The Pound slumped on Tuesday against USD and the Euro following the latest round of voting on Theresa May’s Brexit deal.

The manufacturing PMI (Purchasing Managers’ Index) surveys the UK’s private sector companies and calculates improvement against no change against deterioration. The UK’s manufacturing PMI was at 54.2 points in December, with the expectation of a fall to 53.5 in January as the Brexit deadline neared, but the reality was a sharper fall to 52.8 points.

The IHS Markit/CIPS survey also revealed a large amount of stockpiling had taken place in January; the most since the manufacturing records began in 1992. The additional stockpiling, combined with staff layoffs, slightly altered the losses of the UK’s manufacturing when compared to the likes of Germany and France, who are also struggling.

Speaking about the poor figures, Rob Dawson – Director of the IHS, warned of a potential recession.

“The start of 2019 saw UK manufacturers continue their preparations for Brexit. Stocks of inputs increased at the sharpest pace in the 27-year history, as buying activity was stepped up to mitigate against potential supply-chain disruptions in coming months” said Dawson. “There were also signs that inventories of finished goods were being bolstered to ensure warehouses are well stocked to meet ongoing contractual obligations.

“January also saw manufacturing jobs being cut for only the second time since mid-2016 as confidence about the outlook slipped to a 30-month low, often reflecting ongoing concerns about Brexit and signs of a European economic slowdown. With neither of these headwinds likely to abate in the near-term, there is a clear risk of manufacturing sliding into recession.”

The FTSE 100, which often benefits from a weaker Pound due to better exchange rates for its foreign investors, saw its stock rise this morning and the index passed the 7,000 points mark once more. The 42 point improvement puts the FTSE at 7,009 points.

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