British manufacturing contracted last month at the fastest rate in seven years, rocked by the deepening Brexit crisis and the global downturn, boding poorly for the chances of an economic rebound in the third quarter, a survey showed on Monday.
The IHS Markit/CIPS UK Manufacturing Purchasing Managers' Index (PMI) fell to 47.4 from 48.0 in July, a full point lower than the median forecast in a Reuters poll of economists.
"High levels of economic and political uncertainty alongside ongoing global trade tensions stifled the performance of UK manufacturers in August," IHS Markit director Rob Dobson said.
Sterling slipped on the data release, alongside continued concerns of a no-deal Brexit, and was lower by 0.6% against the dollar for the session, trading at about $1.2080 by 11:00 a.m. London time.
Britain's economy shrank in the second quarter, a hangover from the stockpiling boom in advance of the original March Brexit deadline. Another contraction in the current quarter would officially herald a recession.
The PMI showed British manufacturing succumbing to a downturn that has swept through Europe, despite an uptick in France last month.
Surveys from Lloyds Bank and the European Commission last week also suggested that Britain's economy is stalling, raising the stakes for Prime Minister Boris Johnson, who has promised to take Britain out of the EU with or without a deal.
Respondents to the PMI survey cited the global slowdown and Brexit as reasons for lower demand from domestic and foreign customers, some of whom are moving supply chains away from Britain before the Oct. 31 deadline for leaving the EU.
Survey compiler IHS Markit said its survey was consistent with a decline in the official measure of factory output of nearly 2% quarter-on-quarter.
Manufacturing accounts for 10% of British economic output.
The survey's index of future output fell to its lowest level since records started in 2012.
Activity across manufacturing declined, with production in the consumer goods industry dropping at the fastest rate since February 2009, around the nadir of Britain's last recession, IHS Markit said.