UK food and drink received a score of 49.9 on the Lloyds Bank UK Sector Tracker. A Tracker reading below 50.0 indicates contraction, while a reading above 50.0 indicates expansion.
The tracker also found that food and drink reported the second strongest output growth (58.4), behind providers of software services with a score of 59.7.
In October, 12 out of 14 sectors monitored by the Tracker recorded a contraction in output, up from nine in September and the highest number since May 2020 – when the UK was first in lockdown.
Product demand
Demand for goods in the chemicals (29.5), metals and mining (31.1) and household products (38.4) manufacturing sectors fell at the fastest rate in October.
Jeavon Lolay – head of Economics and Market Insight at Lloyds Bank Corporate and Institutional Banking – said the report suggested that the UK economy may already be in recession and with both domestic challenges and global headwinds unlikely to materially recede in the short term, the key question revolved around how long this downturn may last.
“However, it is worth highlighting that there are sectors and pockets of the economy that continue to perform well,” Lolay continued.
“The Autumn Statement laid bare the scale of the challenge ahead to repair the fiscal finances and restore growth. While the former inevitably necessitated some difficult decisions, the fact that fiscal and monetary policy are working together is clearly positive.”
Labour market slowdown
Elsewhere, the Tracker found early signs of a labour market slowdown in the UK. Employment (52.4) rose at the slowest rate in 20 months in October, while the overall manufacturing sector recording its first drop in headcount since December 2020.
Scott Barton, managing director at Lloyds Bank Corporate and Institutional Banking, added: “Businesses instinctively look closely at their capacity when demand declines. After working through backlogs, they assess whether or not they need to continue recruiting to meet new orders, which is at least part of the reason we saw the slowdown in employment growth in October.
“However, aligning recruitment plans to new orders can only go so far. Businesses must also forecast demand, which could prove particularly challenging for seasonal companies that are usually preparing for their busiest time of the year.
“Businesses should model for different scenarios to determine whether they have enough staff and cashflow to cover operations at various levels of capacity in the coming months. This will help them to build resilience in the face of another challenging period.”
