LONDON (Reuters) – British factories have had their worst month since just after the 2016 Brexit vote in October, due to concerns about the country's approach to EU departure and increased global trade tensions, a survey showed.
PHOTO PHOTO: Transport containers stacked on a cargo ship at the ABP port in Southampton, UK, August 1
In the clearest sign, the UK economy is slowing down After a strong summer, the IHS Markit / CIPS Manufacturing Purchasing Managers Index (PMI) fell sharply to 51.1, the lowest since July 2016, from a downgraded 53.6 in September.
The reading was weaker than all forecasts in a Reuters survey by economists.
New order books and employment entered for the first time since July 2016.
"October saw a worrying turnaround in the performance of the British industry sector," said Rob Dobson, Director of IHS Markit.
"At the current level, the survey indicates that factory production could contract in the fourth quarter and fell by 0.2 percent."
Foreign demand fell for another time in three months with some companies saying that Brexit's uncertainty cost them to work from within the EU.
Many manufacturers are worried about the risk of border delays that will affect their just-in-time processes.
Prime Minister Theresa May is opposed to the opposition to his Brexit plan from his own conservative party, while it has not yet managed to find common ground with other EU leaders, fearing that Britain can leave the EU without a transitional agreement.
Other companies pointed to increasing world trade tensions and weaker demand in the global automotive industry.
Production accounts for about 10 percent of Britain's economic output.
So far, the world's fifth largest economy has proven to be more resistant to the decision to leave the EU than many predictions that were spoken at the time of the Brexit poll.
Strong consumer spending during the summer led to growth in the three months to August.
However, there has been evidence that Brexit's approach in less than five months – without agreement yet to smooth Britain's exit from the block – weighs on companies.
Official figures show that production did not contribute to economic growth in the first half of 2018.
The Bank of England, which will announce its monetary policy decision for November 1200, is expected to keep interest rates on hold until it is clearer about what Brexit will mean for Britain's economy.
Thursday's PMI showed deposit prices for British factories grown at its slowest pace for 28 months, but still high due to rising prices for goods and Brexit hit to the value of sterling.
Writing by William Schomberg; Editing Hugh Lawson