UK economy set for slowdown as Brexit stockpiling boost fades

London: UK manufacturers slashed output in April as the boost from Brexit stockpiling evaporated and car factories halted work, boding ill for the economy in the second quarter, figures on Monday are expected to show.

Production fell by 1.4 per cent from March, the biggest decline since the start of 2017, according to a Bloomberg survey. With little support from construction and the dominant services industry, the economy probably shrank for a second consecutive month.

Factories ramped up output in the first quarter as companies stockpiled goods to avoid supply disruptions ahead of the original March 29 deadline to leave the European Union. But with Brexit now delayed until October, orders are being scaled back and demand met from products piled up in warehouses.

In a further blow to the sector, automakers including Bayerische Motoren Werke AG and Peugeot SA parent PSA went ahead with planned Brexit-related shutdowns in April. Industry figures showed 45 per cent fewer vehicles were produced than a year earlier.

GDP is forecast to have contracted by 0.1 per cent in April, and purchasing-manager surveys last week suggest there was little if any improvement in May. There were also downbeat headlines on retail sales in recent days, while Ford Motor Co. announced plans to close its engine factory in South Wales, with the loss of 1,700 jobs.

Whoever takes over from Prime Minister Theresa May, who resigned as Conservative Party leader on Friday, will inherit an economy under pressure as Brexit uncertainty continues. Bloomberg Economics sees growth in the second quarter slowing to 0.2 per cent from a 0.5 per cent in the previous three months.

The labour market has been the bright spot since the 2016 Brexit referendum, with unemployment at its lowest rate since the 1970s. But cracks may now be appearing. Figures Tuesday are expected to show employment growth coming to a standstill and wage growth slowing in the three months through April.