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Markets UK subcontract manufacturing market upward trend takes a dive

Editor: Briggette Jaya

In the UK, the latest Contract Manufacturing Index (CMI) reveals that the steady upward trend since 2015 in the subcontract manufacturing market has taken a dive.

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The CMI shows the value of the market for contract and subcontract manufacturing services for machining, fabrication and other processes.
The CMI shows the value of the market for contract and subcontract manufacturing services for machining, fabrication and other processes.
(Source: Qimtek)

According to the latest Contract Manufacturing Index (CMI), the UK subcontract manufacturing market has crashed back by 37% in Q2 of 2019 compared to Q1, breaking its steady upward trend since 2015.

The index dropped to 101, just one point higher than the baseline figure of 100, which represents the average value of the subcontract market between 2014 and 2018. This is the lowest it has been since the first quarter of 2015 when the index was first published. Until this quarter the market had been steadily rising to reach a peak of 194 in March this year.

Within the headline figures, both machining and fabrication fell sharply while other processes, including moulding and electronic manufacturing, bounced back slightly in May. The market was fairly evenly split with machining representing 43% of the value of contracts placed and 40% for fabrication.

The CMI shows the value of the market for contract and subcontract manufacturing services for machining, fabrication and other processes.
The CMI shows the value of the market for contract and subcontract manufacturing services for machining, fabrication and other processes.
(Source: Qimtek)

Independent sourcing specialist Qimtek produces the CMI on a quarterly basis, which reflects the total purchasing budget for outsourced manufacturing of companies looking to place business in any given month. The sample covers over 4,000 companies, which together have a purchasing budget of over £3.4bn and a supplier base of more than 7,000 companies with a verified turnover excessing £25bn.

Qimtek owner Karl Wigart comments on the statistic: “The market had been holding up well in the face of uncertainty over Brexit but dropped significantly in April when the UK had been due to leave the EU.” He noted that April, May and June saw a steady decline in the index, with larger companies not sending out projects, which was especially visible in the West Midlands – the heart of the automotive industry.

“This suggests that OEMs had factored a high level of precautionary Brexit stockpiling into their 2019 production schedules and then had to run these stocks down once the leaving date was postponed,” Wigart adds.

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