The weak pound is helping to drive Britain’s manufacturing resurgence

Musa Aumeed brazes a bike frame at the Brompton Bicycle factory in west London January 10, 2014. Loan refusal letters and retailers’ rejections frame the walls of the Brompton Bicycle factory, a reminder of the obstacles the firm has overcome to establish itself as the UK’s top bike-maker, selling 45,000 a year around the world.
Reuters / Luke MacGregor

LONDON – The UK’s manufacturing sector continued to grow strongly in May, driven in part by the continued weakness of the pound boosting exports, according to the latest PMI data from IHS Markit out on Thursday morning.

IHS Markit’s PMI survey for May, a measure of growth in the sector, hit a level of 57.6, remaining “resilient” and “sustaining most of the growth momentum gained” in a strong April for the sector.

“Manufacturing production and new orders both expanded at above survey average rates. Companies benefited most from the continued strength of the domestic market. There was also a solid increase in new export business as well,” an IHS Markit release said.

The PMI reading, given between 0-100, measures activity in the sector – anything above 50 signals growth, while anything below means contraction.

Sterling – which is around 13% lower than its pre-referendum level against the dollar – has been a key driver of the resurgence in the UK manufacturing sector since last June. As IHS Markit’s release notes:

“Overseas demand improved due to a combination of the historically weak sterling exchange rate and manufacturers’ efforts to promote and launch new products in foreign markets. The level of incoming new export orders rose for the thirteenth month in a row, with the rate of growth broadly in line with the average for that sequence.”

That said, domestic demand remained the most vital component of growth, and commenting on the results of the survey, Duncan Brock of the Chartered Institute of Procurement & Supply – which helps compile the survey – said (emphasis ours):

“While not quite hitting the heights of April’s rebound in activity, the manufacturing sector didn’t disappoint with a sustained rise in purchasing activity, output and new orders, optimism at a 20- month high, and storming ahead unfazed by the looming election.

The domestic market persisted as the driving force, but the weak pound’s continuing bounty meant levels of export orders also increased, for the thirteenth month, as export markets made use of the competitiveness of UK firms.”

Here is IHS Markit’s chart:

IHS Markit