News Analysis: Economic uncertainty dampens UK manufacturing

UK manufacturers are paying the price of continued uncertainty around global growth prospects and are beginning to feel a negative effect from uncertainty over the coming Brexit referendum.

This is clear from the purchasing managers index (PMI) for the manufacturing sector in March released Friday.

This showed a small improvement on February's figure, which was the lowest in 34 months. It rose from 50.8 to 51, indicating continued growth -- but the figure was seen as indicating a sector which is failing to make an impact.

"Financial market volatility and heightened concerns about global growth are continuing to weigh on business confidence, outweighing any boost from the weaker sterling," wrote James Smith, economist developed markets at ING Bank in London, in a note.

The uncertainty that the June 23 EU referendum vote brings is leading to weakening demand for capital goods and more expensive consumer goods, evident in a second successive fall in orders for investment goods in the figures.

Smith added: "It is also possible that uncertainty surrounding the outcome of the forthcoming EU referendum is filtering through to business confidence. It is possible that, in advance of the vote, businesses temporarily delay hiring/investment plans until the result becomes clearer."

The figures were seen as disappointing by business groups, and indicated that 2016 will continue to be a tough year for the sector.

Lee Hopley, chief economist at EEF, the manufacturers' organization, said: "There isn't anything in this, or other surveys of late to suggest that manufacturing will make much of a dent in the imbalanced growth across the UK economy in the coming quarters." Endit