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UK factories keep growing but hike prices as 'unworkable' Brexit rules hit supply chains

Tom Belger
·Finance and policy reporter
·2-min read
COUNTY DURHAM, UNITED KINGDOM - MAY, 2018. Aerial Photograph Of Cassel Chemical Works, Billingham, County Durham on May 5th, 2018. Located just west of the River Tees,  2 miles south of Billingham, in this aerial photograph taken by David Goddard.
A chemical works in Durham as UK factory exports grow. Photo: David Goddard / Contributor via Getty Images.

UK manufacturers’ order books have continued to grow over the past month, despite lockdown restrictions and “unworkable” Brexit border rules hitting supply chains.

A majority of firms expanded in January, according to a closely followed purchasing managers’ index (PMI) for the sector.

The business survey is turned into headline readings on performance, with figures above 50 showing most firms report growth and below showing decline. The final figure came in at 54.1 in January, higher than the 52.9 reading suggested by preliminary figures last month.

But factories are battling major challenges, and growth was the weakest in three months.

READ MORE: UK lockdown sends economy spiralling at fastest rate since May

Supplier lead times were the longest in almost three decades since the poll began. Shortages and delays pushed up raw material prices to a four-year high. Factories passed on costs, with their own prices at the highest in more than two years.

"Companies reported that the national lockdown, end of the Brexit transition period, client closures and renewed uncertainty at the start of the year all contributed to the decrease in new orders," said the PMI report by IHS Markit and the Chartered Institute of Procurement & Supply (CIPS).

WATCH: Nissan to stay in Britain despite Brexit challenges

A separate poll by manufacturing trade group Make UK showed 60% of members reporting “significant disruption,” with Brexit paperwork requirements and border rules hitting both supplies and exports.

Make UK said some firms had abandoned EU trade altogether, with a “serious commercial impact on companies already struggling to survive the current COVID crisis.”

Business chiefs are demanding the government ramp up hiring of customs agents to help firms handle new rules. Some firms are paying tariffs for UK-EU trade rather than navigating complex rules-of-origin processes to avoid them, according to Make UK.

READ MORE: Manufacturers demand government address Brexit border issues

It comes on top of further supply chain issues linked to pandemic-linked disruption at UK ports and COVID-19 testing of hauliers entering France.

Duncan Brock, group director at the CIPS, said small and medium-sized firms “bore the brunt” of Brexit and COVID-19 disruption. “They struggled to cope with increased demands in paperwork, border controls and the effects of port disruption where corporates with larger resources were able to tap into current stocks and find workarounds to these obstacles.”

Similar PMI data for eurozone manufacturers on Monday also showed a majority of surveyed firms expanding, with a reading of 54.8. Germany and Italy saw strong growth.

The eurozone data was marginally higher than previous estimates, but marked a decline on the 55.2 reading seen in December.

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