The UK manufacturing sector took a sudden and sharp turn for the worse today after new figures revealed a shock contraction in production.
The latest Markit/CIPS survey, where a reading above 50 represents growth, fell to 45.9 in May from 50.2 the previous month, well below City hopes for a figure just below 50.
It is the second-steepest fall in the survey's 20-year history and came as new orders dropped at the fastest pace since March 2009.
Manufacturing orders have shrunk for the fastest pace in three years
Markit said the collapse reflected not just the crisis in the eurozone but the increasing weakness of the UK domestic market, with overall order books shrinking at a faster rate than export orders.
It found that manufacturers were struggling to replace orders from Europe with work elsewhere, such as the US and Asia.
Barring a sharp turnaround this month, manufacturing output could fall by as much as 1% in the second quarter, dashing hopes that the UK will make a quick exit from recession.
CIPS chief executive David Noble said: "The harsh realities of the weak global economy and sluggish domestic demand are bearing down on UK manufacturing.
"This may prove to be a blip, but there is a long way to go before the manufacturing sector recovers fully from the global financial crisis. The sector could well become a drag on the UK economy as it seeks a return to better health."
Job losses were reported for the first time in five months during May, while CIPS also highlighted the increasing non-replacement of leavers.
The only bright spot for economy-watchers came from an easing in inflationary pressures, with the rates of increase in input costs and selling prices both slowing over the month.
Howard Archer of IHS Global Insight said: "The depth of the manufacturing weakness in May increases the already appreciable risk that the economy will contract again in the second quarter – especially as it is handicapped by the extra day’s public holiday resulting from the Queen’s Diamond Jubilee."
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