The latest manufacturing figures show British factories last month cut jobs at the most dramatic pace in the last six years, and are stockpiling parts and materials at record rates.
No prizes for guessing the reason: Brexit, which is due to happen on March 29.
IHS Markit’s latest Purchasing Managers’ Index (PMI) for the U.K. stands at 52.0 for February, down from 52.6 in January. As noted by Reuters, that suggests greater factory output than in France or Germany, but mainly because manufacturers are stockpiling and racing to clear backlogs before the Brexit date.
There is currently still a strong possibility that the U.K. will crash out of the EU later this month without a transition deal, creating serious supply chain and tariff problems, so manufacturers have every incentive to do as much business as they can beforehand.
“Although the trend in manufacturing output improved slightly in February, this mainly reflected efforts to reduce backlogs of work and build stocks of finished products in advance of Brexit,” wrote the market research outfit. “Growth of new order inflows eased to near-stagnation, amid signs of a slowing domestic market and a further drop in new export orders. Companies linked lower overseas demand to weaker global economic growth, especially in Europe.”
“Official data confirm that manufacturing is already in recession, and the February PMI offers little evidence that any short-lived boost to output from stock-building is sufficient to claw the sector back into growth territory,” warned IHS Markit director Rob Dobson.
The picture across the English Channel isn’t looking great either. IHS Markit’s Eurozone PMI for February showed the first reversal of the region’s factory activity in more than five years, with new orders falling at the fastest rate for six years. The reversal was denoted by a drop below 50, in this case reaching 49.3—the Eurozone PMI has been falling for seven months now.
Brexit is again a factor here, alongside a general slowdown and fears over the escalation of trade wars.
Meanwhile, the London Stock Exchange on Friday announced the cutting of 250 jobs, as a cost-saving measure. CEO David Schwimmer—not that David Schwimmer, obviously—said the group was “very well prepared for whatever comes from a Brexit situation.”