Significant challenges ahead as UK plc stockpiles

by Business Travel iQ | 07 February 2019

Fastest uptick in buying raw materials ahead of a potential no-deal Brexit

It’s not just householders who are stocking up on supplies in preparation for a no-deal Brexit – Britain’s manufacturers are too.

According to the latest monthly release of the IHS Markit/CIPS UK Manufacturing Purchasing Managers Index (UK PMI), the companies that make everything from medical equipment to car parts have increased the rate at which they are building up their inventories of the inputs to their processes at the fastest rate in the 27-year history of the index.

The index’s creators said, “Higher demand for raw materials, along with input shortages and supplier capacity issues, led to a further marked lengthening in average vendor lead times during January.”

The index itself (see below) stood at 52.8 - a value over 50 represents an increase in confidence among purchasing managers over the previous month. However, the value is the second weakest since the EU referendum result.

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Rob Dobson, director at IHS Markit, said: “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. There were also signs that inventories of finished goods were being bolstered to ensure warehouses are well-stocked to meet ongoing contractual obligations. “Despite the temporary boost provided by clients’ pre-purchases and efforts to build-up stocks, the underlying trends in output and new orders remained lacklustre at best. Growth of new order inflows slowed sharply, and new export orders were near-stagnant, contributing to the weakest trend in output since the month following the EU referendum (July 2016).”

The worry for the business travel sector is that the UK PMI represents a confidence measure for UK plc and that translates directly into business travel budgets and the amount of business travel.

Dobson adds, “Without a strong upturn in new orders and underlying growth there may be further hesitation to hire next month and with a general slowdown in the global economy and the Eurozone, we’re likely to continue to see significant challenges ahead.”

No matter what your view on Brexit, these are worrying times for business travel.

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