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British factories laying off workers as economy heads for recession

By Eir Nolsoe

BRITISH factories are laying off workers at the fastest rate since the pandemic hit as a slump in demand causes warehouses to fill up with unsold stock.

A slowdown in new orders has triggered a fall in manufacturing employment for the second straight month, according to S&P Global’s manufacturing Purchasing Managers’ Index. The metric for employment fell to 47.7 last month, which is the lowest level since November 2020, when the UK was under strict lockdown restrictions. Any number under 50 implies a contraction.

Stocks of finished goods are also piling up in warehouses at the fastest rate in three and a half years amid distributional delays and falling demand.

It comes following reports that retailers, including Marks & Spencer, are being forced to ask suppliers to delay deliveries to warehouses to deal with unsold stock, as many consumers cut back on spending to weather the cost of living crisis.

The issues are symptomatic of a wider recession taking hold of factories across the UK, which are battling evaporating demand, supply chain disruptions and shortages of many components in international markets.

While S&P Global’s manufacturing index improved slightly to 46.5 in November from 46.2 the previous month, it remains well below the 50-mark for the fourth straight month, signalling a contraction. This is one of the lowest levels during the past 14 years. Optimism in the industry is also at the lowest level since the expectations data series started a decade ago.

Weakening confidence and high inflation are hitting sales volumes, with demand slumping both at home and abroad. Markets including the EU, China and the US are buying less from British companies, with new export business contracting at the fastest rate in two and a half years. Some businesses also reported that Brexit had dampened interest in their exports.

Gabriela Dickens of Pantheon Macroeconomics said: “The manufacturing sector likely is in recession.

“The outlook for next year is just as grim. Demand for industrial goods likely will be hit again early next year as real incomes are squeezed.”

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2022-12-02T08:00:00.0000000Z

2022-12-02T08:00:00.0000000Z

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Daily Telegraph