Factory output jumps as stockpiling increases amid Brexit fears

Britain’s manufacturers ramped up their stockpiling efforts last month in preparation for a potential no-deal Brexit in less than 90 days’ time, with factory output rising to the highest level in six months.

According to the latest snapshot survey from IHS Markit and the Chartered Institute of Procurement and Supply, growing concerns about disruption from border hold-ups after 29 March led more businesses to build up stocks in December.

Factories stockpiled raw materials used in production processes, as well as finished goods, at one of the fastest rates on record, according to the gauge of activity that is closely watched by the Bank of England and the Treasury for early warning signs from the British economy.

The IHS Markit/Cips manufacturing purchasing managers’ index rose to 54.2 in December from 53.6 in November, beating all forecasts in a Reuters poll of economists, on a scale where a reading above 50 indicates economic growth.

In a sign of mounting stress for the British economy as the impasse in Westminster over Brexit continues, the stockpiling of finished goods increased at the second-fastest rate since 1992.

The pound’s weakness also helped support export orders, with growth from the US, Europe, China, India, Brazil and Africa.

The latest snapshot raises the prospect that Brexit uncertainty may perversely benefit the economy in the short-term by prompting companies to raise their activity levels to prepare for a no-deal scenario.

The Bank has previously warned the majority of businesses in Britain have done little to prepare for a no-deal scenario, while the government has started to tell more companies to make preparations as it steps up its own plans.

 

 

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