UK factories blame 16th month in a row of falling exports on Brexit barriers

London: British factories have reported a 16th consecutive month of falling exports, with manufacturers warning obstacles to trade since leaving the EU are undermining business relationships with firms on the continent.

The findings came as the former US treasury secretary Larry Summers said Brexit will be remembered as a “historic economic error” that damaged the UK economy and has helped to drive inflation higher.

The manufacturing sector contracted for a 10th consecutive month in May, dragged down by steady falls in exports over the last 16 months, according to the S&P Global/CIPS purchasing managers index (PMI).

Exporters blamed factors including a loss of orders to the US and mainland Europe, and an increasing number of EU clients switching to more local sourcing to avoid the customs barriers, paperwork and delays involved in exporting goods from the UK.

S&P spokesperson Rob Dobson said: “Manufacturers are finding that any potential boost to production from improving supply chains is being completely negated by weak demand, client destocking and a general shift in spending in the UK away from goods to services.

“These factors are also driving a broad decrease in demand from overseas amid reports of lost orders from the US and mainland Europe. The retrenchment in export demand is also being exacerbated by some EU clients switching to more local sourcing to avoid post-Brexit trade complications.”

The PMI number fell to a four-month low of 47.1, down from 47.8 in April. A figure above 50 indicates expansion.

Make UK, the manufacturers’ lobby group, said exporters lacked government support.

“With powerful domestic manufacturing policies in place in the US and the EU, manufacturers can see that the likelihood of much export expansion to the UK’s biggest manufactured goods trading partners is dwindling,” it said.

Their comments underlined criticism from Summers earlier in the day. He singled out Britain’s departure from the EU as a factor for higher costs, criticising the UK’s economic policy as “substantially flawed for some years”.

Brexit “reduced the competitiveness of the UK economy, put downwards pressure on the pound and upwards pressure on prices, limited imports of goods and limited in some ways the supply of labour,” Summers told BBC Radio 4’s Today programme. “All of which contributed to higher inflation,” he added.

Official figures last week showed inflation remained stubbornly high, at 8.7%, in the UK as households come under pressure from the fastest annual rise in food prices since the late 1970s. US consumer price rises have been slowing in recent months, dropping to an annual inflation rate of 4.9% in April.

In a stark critique of Britain’s management of the economy, Summers did not spare the Bank of England. He blamed the central bank for higher levels of inflation, saying these were “reinforced by very ill-judged monetary policies that were substantially too expansionary for too long”.

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Asked if the Bank would be right to keep raising interest rates in order to tackle persistently high inflation, Summers said he believed this was the right path, even if it may not seem palatable.

“There is a lesson from experiences we have all had,” he said, comparing it to treatment for illness. “Usually when you are prescribed a course of medication, even if the drugs are not so pleasant themselves, and even if they possibly have some side-effects, it’s usually better is to take the whole course of medicine, the first time it’s prescribed, than to stop taking the medicine early and wish [sic] a recurrence of the underlying infection.”

A recent report showed that British households have paid £7bn since Brexit to cover the extra cost of trade barriers on food imports from the EU.

Researchers at the London School of Economics (LSE) estimated the impact of leaving the bloc on UK food prices and found that trade barriers consistently hampered imports, pushing up bills by an average of £250.

The UK has the highest food inflation rate in the industrialised world, according to recent data. The LSE researchers calculated the cost of food in the UK had rocketed by 25% since 2019, but this would have been only 17% without post-Brexit trade restrictions, nearly a third lower.