IHS Markit/CIPS: UK Manufacturing PMI near-record high
UK manufacturing trends
For the UK manufacturing sector, growth of output and new orders were both reported by IHS Markit and CIPS as among the best seen over the past seven years, which in turn has led to a strong increase in employment. Despite this, the sector continues to face supply chain delays and input shortages, which resulted in increased purchasing costs and record selling price inflation.
UK Manufacturing IHS Markit/CIPS Purchasing Managers’ Index® (PMI®)
Seasonally adjusted, IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to 60.9 in April, which was an increase compared to March (58.9) and above the estimated 60.7 for April.
Increasing for the eleventh consecutive month, the latest readings are the highest since July 1994 (61.0). The output growth for April has been attributed to the loosening of lockdown restrictions, improving demands and a rise in backlogged work.
“The manufacturing sector was flooded with optimism in April as the PMI rose to its highest level since July 1994, bolstered by strong levels of new orders and the end of lockdown restrictions opened the gates to business. It was primarily the home market that fuelled this upsurge in activity though more work from the US, Europe and China demonstrated there were also improvements in the global economy. This boom largely benefited corporates as output growth at small-scale producers continued to lag behind,” said Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.
In addition to expanding production, total new orders rose for its third consecutive month, which was attributed to a revival of domestic market conditions, stronger client confidence, parts of the economy reopening and improving global market conditions.
While new exports rose in April, the rate was reported as weaker in comparison to new orders. “Companies reported improved new work intakes from several trading partners, including mainland Europe, the US, China and South-East Asia. Large-sized manufacturers saw a substantial expansion in new export order intakes, compared to only a marginal rise at small-sized firms,” said IHS Markit/CIPS.
UK Manufacturing’s outlook
Remaining positive at the start of the second quarter, 66% of companies forecast that output will be higher in a year's time, which is attributed to expectations for less disruption related to COVID-19 and Brexit, economic recovery, improved client confidence and new product launches.
“Further loosening of COVID-19 restrictions at home and abroad led to another marked growth spurt at UK factories. The headline PMI rose to a near 27-year high, as output and new orders expanded at increased rates. The outlook for the sector is also increasingly positive, with two-thirds of manufacturers expecting output to be higher in one year’s time. Export growth remains relatively subdued, however, as small manufacturers struggle to export,” said Rob Dobson, Director at IHS Markit.
Adding to comments from IHS Markit and CIPS, , Managing Director of Freight and Logistics at Accenture Global said: “While today’s figures are positive overall, the worsening supply situation is still a concern, with rates of both input costs and selling price inflation running far above anything previously seen. Shipping delays and material shortages are driving huge backlogs of uncompleted work and the surge in manufacturing orders is leading to many firms struggling to boost operating capacity to keep up with demand. With business expectations becoming even more optimistic as the economy rebounds, the big question will be whether firms will be able to cope with the surging inflows of new orders.
“As ongoing supply chain issues are still at large, companies with wide international footprints should look to reassess their logistics strategies by running supply chain stress tests and simulations in order to respond quickly to upswings and variability in demand. A flexible and resilient supply chain will be a key way for businesses to remain both competitive and stable as we emerge from the pandemic”
Accenture/SAP to accelerate sustainable transformation
Decades long, Accenture and SAP have been collaborating for many years to help companies to embed sustainability across their entire business operations to unlock new value in their supply chains.
Breaking down Accenture and SAP’s latest partnership
By combining SAP’s technology with Accenture’s and broad industry knowledge, the two are expanding their current partnership to create new solutions that empower companies to accelerate full decarbonisation in the supply chain, and capture their share of economic growth that a circular economy could bring.
The new solution
Co-innovating and co-developing, SAP and Accenture plans to create a new solution for responsible production, manufacturing and design. Its capabilities will help companies to embed sustainability metrics across their value chain and supply chains.
How does it work?
The solution harnesses integrated data from multiple operations, allowing companies to better design and produce products with less waste, better recyclability, and more recycled content.
By providing this solution, SAP and Accenture hope to help to reduce the growing cost of compliance which has been driven by new regulations.
“Our work together will enable SAP’s customers, which include 92% of the Forbes Global 2000, to use their core systems to help drive their sustainability agenda, optimize their ESG performance and achieve their goals. This expanded collaboration builds on our long history with SAP — including our joint partnership with the — and our shared commitment to drive adoption of the Sustainable Development Goals,” said Julie Sweet, chief executive officer at Accenture.
SAP’s Climate 21 initiative
In addition to partnering with SAP on this new solution, Accenture supports SAP’s initiative. Climate 21 allows companies to use analytics to measure and minimise their CO2 emissions as well as lower their carbon footprint across a products lifecycle.
In doing so, sustainability metrics harnessed across the end-to-end supply chain allows for an integrated view of environmental savings and cost impacts, as well as the ability to more easily optimise operations.
“To successfully tackle the greatest threat to our world today, we need to collaborate at every level of business and society. Building on our long-standing and trusted partnership, SAP and Accenture are joining forces to help our customers realize long-term growth in a sustainable way. We’re creating visibility into the environmental impact across the entire value chain, providing enterprises with the insights they need to take the right action and accelerate their transition to the circular economy,” said Christian Klein, chief executive officer at SAP.
SAP.iO a global accelerator
As part of the SAP.iO, the ‘Sustainability Future’ program - the latest cohort to date - aims to help B2B startups in their early stages drive digital transformation and innovation in four target areas: carbon tracking and trading, resource efficiency, climate risk tracking and mitigation, and circular economy.
“Implementing sustainable supply chain management and circular economy principles is an incredibly challenging task for companies, given the diverse set of ESG issues and multiple stakeholders involved,” said Bjoern Stengel, senior research analyst, Worldwide Business Consulting and ESG Business Services at IDC.
“According to IDC’s research, issues around enterprises’ value creation process - product design and lifecycle management, materials sourcing, etc. — are the ESG topics that will generate the greatest near-term demand. This new offering from Accenture and SAP allows clients to generate critical, data-driven end-to-end insights that take into consideration non-financial metrics that are needed to build sustainable supply chains and help companies create shared value,” concluded Stengel.