UK Factory Production Drops At Fastest Pace In 8 years

UK manufacturing production and new orders fell at the fastest rate in eight years as a result of the coronavirus pandemic, a survey of business leaders showed.

On Wednesday, data provider IHS Markit said its closely watched index of Purchasing Managers (PMI) for the manufacturing sector dropped to 47.8 in March.

UK employment figures declined at the fastest rate in more than 10 years, with the coronavirus outbreak a heavy toll on the region's economy, according to Wednesday's figures.

"The latest survey numbers show how the COVID-19 global outbreak is causing major disruptions to UK manufacturers' growth, demand and supply chains," Rob Dobson, IHS Markit's chief executive officer, stated.

Dobson said factories have been faced with component shortages as supply chains are disrupted. New orders also plunged as the global economy freezes. Job losses have been related to lower production rates and new orders as a result of the widespread slowdown.

Duncan Brock, group director of the Chartered Institute of Procurement & Supply, said the manufacturing sector has been pushed sideways into the territory of contraction, facing some of the most difficult trading conditions since the release of the Purchasing Managers Index records.

The export-dependent manufacturing sector in Germany experienced a blow in March as the pandemic triggered factory closures and dented demand.

IHS Markit's PMI in Germany, published late Tuesday, fell from 48.0 in February to 45.4 in March - below 50 marks a contraction.

The March PMI data shows the biggest decrease in production for the heavyweight manufacturing sector in the country since the 2009 financial crisis.

Seamus Nevin, Chief Economist at Make UK, the association of producers, said some firms have had to shut down and many of those that remain open have suffered from plunging orders or production.

Others have turned to producing goods vital to the national effort to halt the spread of the virus; a testament to why it is so important to back up manufacturing.

"Fabrication companies expressed unparalleled optimism about investment and trade at the beginning of this year, but that was all swept away by current events," Nevin stressed.

Statistics for the rest of Europe, also released Wednesday by IHS Markit, pointed to an even sharper decline in factory output on the continent. In March, Eurozone manufacturing reported a PMI of 44.5, with operation contractions across Spain, Italy, France, Germany and Switzerland.

Shares in UK banks also plunged sharply, after the biggest lenders in Britain gave in to regulators' pressure to cut their dividends for the year.