By Andy Bruce
LONDON, March 1 (Reuters) – British factories slashed jobs in February and braced for Brexit by stockpiling goods at the fastest pace seen in any Group of Seven country since records started in the early 1990s, a survey showed on Friday.
The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI), a gauge of activity in British industry, fell to 52.0 from 52.6 in January, as expected in a Reuters poll of economists.
Although stronger than French and German factory PMIs, IHS Markit said the boost to British factory output mostly reflected stockpiling and a drive to cut work backlogs in case the country fails to get a transition deal to smooth the shock of Brexit.
The PMI’s stocks of purchases index rose in February to 59.1, the highest level on record for any G7 PMI.
Some 70 percent of factories cited Brexit as the reason behind the record drive to build up stocks of parts and materials, survey compiler IHS Markit said.
Britain’s departure from the European Union is scheduled to take place on March 29, but lawmakers in London have yet to agree on the terms of a divorce deal, leaving open the possibility of a no-deal Brexit.
The country’s economy slowed sharply in late 2018, hit by a loss of momentum in the global economy as well as Brexit concerns. Economists say the weakness has continued in 2019.
Prime Minister Theresa May opened up the possibility of a short extension to the exit date this week.
Business groups have expressed exasperation at the lack of clarity around Brexit and Friday’s PMI of the manufacturing sector – representing about 10 percent of total British economic output – added to signs that the impasse is hurting companies.
Factories cut jobs at the fastest pace in six years and were increasingly downbeat about the future, the survey showed.
“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,” IHS Markit director Rob Dobson said.
Stockpiling is likely to take a chunk out of manufacturers’ operating profit, leaving less money for investment even in the event that Brexit goes smoothly from here.
The PMI showed export orders declined for a fifth month out of the last seven, reflecting in part a pronounced slowdown in the global economy, especially in Europe.
“Manufacturing and the broader UK economy therefore face a difficult 2019, with the slowdown being exacerbated later in the year as inventory positions are unwound and Brexit-related headwinds likely to linger,” Dobson said.
PMI data for the construction and dominant services sector are due on Monday and Tuesday.
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