The U.K.'s manufacturing activity contracted for the third straight month in July and remained at its worst level since February 2013, according to a survey by IHS Markit and the Chartered Institute of Procurement & Supply.
The headline seasonally adjusted purchasing managers' index came in at 48.0 in July, unchanged from June and still below the neutral 50.0 mark. The consensus estimate of economists polled by Econoday was for a reading of 47.7.
The decline in manufacturing production was the steepest in seven months as firms scaled back output. Demand from domestic and overseas markets fell, with weaker new export business reflecting lower intakes from the EU and China.
Companies attributed the weakness to ongoing uncertainties and the global economic growth slowdown. They also noted a rerouting of supply chains away from the U.K. ahead of Brexit.
Manufacturers continued to raise stocks of finished goods in preparation for the U.K.'s departure from the EU in October, but at a noticeably lesser extent than earlier in the year, the survey noted.
Job cuts persisted for the fourth month in a row, with some companies reporting natural wastage, recruitment freezes and cost-control initiatives. Business optimism regarding output improved, with more than 46% of respondents expecting output to be higher in the year ahead.
"The weak, highly competitive environment makes a sustained revival highly unlikely in the coming months," said Rob Dobson, director at IHS Markit. "However, a short-lived bounce leading up to October should not be ruled out, as some manufacturers are already gearing up to restart Brexit preparations."